the Business Forum and
the Economic Partnership
in Brighton & Hove
Homepage    BCRP Intranet    Funding    Events    Knowledgebase    Links    About us     Contact us
Key projects



Workforce development 


Business &

Property &
Development sites




Consultation opportunities

Brighton & Hove Business Forum
8-11 Pavilion Buildings, Brighton, BN1 1EE
Tel: 01273 735442
Email: info@brighton

© Brighton & Hove
Business Forum

News - 13 March 2004
Looking for profit!

Small Business likely to be clobbered in Budget!

With income tax and VAT both raising considerably more revenue for the Exchequer than Company tax it is highly likely that the Chancellor’s budget on 17th March will concentrate on redressing the balance but it is the small fry that are likely to get truly clobbered.

Gordon Brown’s intentions may have been hidden in the pre-budget report published in December 2003. He hinted at the end of the zero rated £10,000 threshold on small company profits which had been put in place in 2002 to encourage entrepreneurs. It has encouraged literally thousands of self-employed people to convert to Limited Company status but the size of the stampede has taken the government by surprise. In 2002-03 nearly 100,000 applications were received by Companies House and they are still coming at the rate of about 7000 per week. The government had expected it to cost £20m in lost tax revenue in 2002-03 and £256m in the following year but a figure of £1bn is probably closer the mark.

The situation for the Exchequer is exacerbated by the fact that many companies draw the £10,000 tax free profit as a dividend which is free of national insurance contributions (NIC) as well. Thus the owner of a small company with £15,000 profit can take just under £5,000 as salary which is beneath the income tax and NIC threshold and £10,000 as dividend and effectively pay no tax at all.

The temptation for the Chancellor to claw back some of this lost income must be compelling but he may shy away from abolishing the zero rated profit threshold altogether because it would look like too much of a u-turn only two years after it was introduced and at a time when he talks enthusiastically about encouraging entrepreneurs. He could, however, levy NICs on dividends for closed companies with fewer than 30 shareholders.

For many one-man businesses that converted to take advantage of the tax free threshold the price to pay was the considerable increase in red-tape and paperwork that Limited companies have to complete. While it is fairly straightforward to convert to Limited status it is complicated to “dis-incorporate”.

Small business thinking of converting to Limited Company status should do nothing before the budget and those that have already converted should consider voting themselves as much of a dividend as they can afford before the budget. But they will have to make sure that they have made enough profit to cover the dividend. Taking a dividend without the profit in place to support it will not be acceptable to the Inland Revenue.

Monday morning might be a good time to chat to your accountant.

For the BBC prediction of the Chancellor's Budget click on the following link: -

Read related items on:
Brown, Gordon

Browse our business Knowledgebase or search by keyword


14 March 2018
Better Business for All Event with BEIS
7 March 2018
Brighton celebrates women in tech as Spring Forward festival returns for a fourth year 6 March 2018
Six months of success for BTN BikeShare 2 March 2018
Sustainability in Action masterclasses for Sussex businesses 2 March 2018
Doing Business in China comes to Brighton 1 March 2018
Brighton & Hove Chamber of Commerce presents: Protecting your brand- a guide for fast growth businesses 1 March 2018
Long haul passengers boost local economy and jobs, according to new Gatwick report on the 'Visitor Economy' 28 February 2018
Save time reporting crime 27 February 2018
Warren Morgan Resigns from Brighton & Hove City Council 23 February 2018
Brighton Technology Company, Paxton Ranks in Sunday Times 100 Best Companies to Work For 23 February 2018
Greater Brighton's Commercial Property Database 22 February 2018
SE-ASSIST - Launch of Loan Capital in Greater Brighton 19 February 2018
House Price update Q4 2017 19 February 2018
What would you do in a crisis? 19 February 2018
The investment journey for high growth entrepreneurs 9 February 2018
Make Change Count 2018 - helping rough sleepers in Brighton & Hove 8 February 2018
Brighton Technology Company Paxton Announces Recipients of New Scholarship Programmein Association with the University of Brighton 8 February 2018
Cyber London Accelerator Invites Summer 2018 Entries 8 February 2018
Innovate UK Launches Strand 2 Emerging and Enabling Technologies Sector Competition 8 February 2018
Success In Sussex As Food And Drink Heroes Crowned Winners 8 February 2018
UK Games Fund - Fourth Round Open to Applications 8 February 2018
Innovate UK & Prince's Trust Launch Young Innovators' Programme 6 February 2018
Brighton & Hove Food Partnership launches 'Kit Out The Kitchen' crowdfunding campaign 2 February 2018
Brighton & Hove Council and Crest Nicholson win £15m government funding to kickstart King Alfred project 1 February 2018
Could a Utilise Plus Programme grant help you? 1 February 2018
Shoreham Port Facilitates Huge Operation 18 January 2018
IUK Announces Collaborative R&D Funding for Connected and Autonomous Vehicles Simulation 18 January 2018
Renault-Nissan-Mitsubishi Launches $1 Billion Corporate Venture Capital Fund for Next Generation Mobility 17 January 2018
PORTlife #17 Newsletter Out Now 17 January 2018
Over £19,000 raised for Burning the Clocks 2017 11 January 2018
Brighton Main Line Improvement Project: Planned closures in October 2018 and February 2019 11 January 2018
Come on in! Fairtrade Fortnight 2018 8 January 2018
Sussex Business SkillSnap targets hospitality industry skill shortage 3 January 2018
House Price update 2017 Q3 20 December 2017
£14.35 Million European Regional Development Fund Launched 19 December 2017
Leading the way - Sustainability in Action masterclass 15 December 2017
Brighton is among the best places to start a business due to their strong growth factors 15 December 2017
GTR consultation ends 20th Dec 2017 13 December 2017
Ethical Food StartUp Programme - Idea Generation Workshop 12 December 2017
Utilise Plus launch programme of energy efficiency grants and business support for SMEs