The Budget tax increase on small company profits has hit the formation of new UK companies by 18 per cent according to figures published by Companies House.
Accountants Wilkins Kennedy says the figures prove that since the Budget fewer new businesses are forming as companies, and less sole traders and partnerships are deciding to convert into companies.
According to the figures 46,794 new companies registered with Companies House between March 21 and May 2 this year compared to 57,264 over the same period last year, a fall of 18 per cent.
Kevin Walmsley, Partner at Wilkins Kennedy, said: "The Budget tax rises have acted as a brake to the formation of new companies. With general business confidence at its highest level in four years the negative impact of the Budget on the small business sector appears to have been fairly significant."
On March 17, in a measure now known as IR591, the Chancellor announced that from April 1 small companies would pay corporation tax at a minimum of 19 per cent on profits distributed to non-company shareholders. All companies with profits of up to £50,000 and where the owners pay themselves partly in dividends have been hit by the rise. A company making £10,000 profit now pays £1,900 extra tax each year under the new rules if the profit is distributed as dividend.