BUDGET COMMENT: Sly departure of NI ceiling

A hike in national insurance had to be the most widely previewed Budget measure of all time. Over recent days acres of newsprint have been devoted to preparing the public to pay more income – sorry income-related – tax.

A simultaneous – and sly – removal of the NIC ceiling on the 1% increase has also won the chancellor few friends among businesses. The jury is still out on how taxpayers feel about the rise – indeed it may well not be until the next general election, when the public has had time to test promised improvement in public services, that the government finds out.

But this wasn’t a Budget that was without good news for business, particularly SMEs. Knowing that the corporate world had felt all but sidelined by many of his previous Commons showcases, Brown made several conciliatory gestures this time around.

He removed VAT on bad debt and promised businesses with turnovers of up to £100,000 they would be given a flat rate VAT calculation, instead of recording the charge on every single sale.

He also pledged a cash boost for small businesses to encourage them to trade online and cut to zero the 10p tax rate for businesses earning £10,000 or less in profit.

But it will be the rise in national insurance that occupies the headlines over the coming days. From next April NICs will increase by 1% for employers, employees and the self-employed. And no ceiling applied to that additional percentage.

As Alastair Kendrick, Ernst & Young tax director, told ‘It is unfortunate that the chancellor could not have spelt out more clearly the changes, to avoid people not appreciating the impact on them and business. ‘This,’ he concluded, ‘is a stealth tax both on individuals and businesses, which comes as a nasty shock.’

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