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Pre-Budget report fails the small to medium-sized business

London, UK (20/04/2009)

The Budget Report that is due to be presented by the Chancellor of the Exchequer, Alistair Darling, on April 22nd is scheduled to deliver the small to medium-sized businesses in the UK increased taxes for the short, medium and the long term.

Quite astonishingly, at a time when unemployment is set to rise over three million, one of Darling’s policies is to increase National Insurance Contributions.

However, the Chancellor is expected to introduce a lower rate of Employers’ National Insurance Contributions for the less well-paying jobs of 5% for employees earning up to £20,000 for 2011 instead of 12.8%. This will ease the cost of taking and keeping on staff for the struggling small business. This move will benefit part-time workers immensely who make up a large proportion of the UK’s workforce.

This much needed assistance will only be helping the small business owner in the short term for Alistair Darling is planning to introduce VAT increases in the coming years in an attempt to inject essential capital into revitalising the state of public finances. It is expected that he will be raising VAT to 22% over the next three years in a staggered format; returning to 17.5% in 2010 then 20% in 2011 and then finally finishing at 22% in 2012. Darling is spreading out the raise in order to encourage spending in the short term. Although this may kick start the economy if the predicted spending does occur, it will also mean a repeat of last year’s administrative costs of small business when each rate change takes place.

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