At the end of September, the government announced help for small businesses. This blog post outlines the ‘mini-budget’ and breaks down what matters and how it could impact your business.*
*Note: This blog will be updated as the mini-budget continues to evolve. The post is up to date as of 11 October 2022.
At a top level, the mini-budget, the government’s Growth Plan and announcements on energy caps are very good news for small businesses. Excuse the pun, but in many ways, the government has put its hand into its pocket to keep the lights on for small businesses this winter. The budget has also changed decades of fiscal discipline. And if you believe the media and political pundits, it is a very risky move. After all, the government still needs to pay back what it borrowed to support individuals and businesses during the pandemic.
Mini-budget changes at a glance
These are the changes that impact you and your small business:
Income tax: (Not including Scotland)
- The basic rate has been cut by 1p to 19p from April 2023.
- From April 2023, the higher rate of Income Tax will be 40%
- The planned increase in corporation tax from 19% to 25% has been scrapped.
- This means that from April 2023, the rate will remain at 19% for all firms.
- The 1.25% increase in National Insurance introduced in April 2022 has now been scrapped. I.e. from November 6th 2022.
- The Health and Social Care Levy due to be introduced in April 2023 has been scrapped.
- No change to the threshold that individuals pay National Insurance, i.e. £12,570
- Eligible businesses still get up to £5000 in employment allowance to reduce their annual National Insurance Liability.
Dividend tax: The 1.25% increase to rates introduced in April 2022 has been reversed from April 2023
Annual investment allowance: The temporary increase from £200k to £1m has been made a permanent increase. This gives 100% tax relief to businesses on their plant and machinery investments up to £1m.
IR35 rules changed: The 2017 and 2021 changes to off-payroll working are to be repealed from April 2023. This means workers providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and National Insurance contributions.
Company Share Option Plan: From April 2023 companies can now grant up to £60k (up from £30k) of share options to each eligible employee.
Seed enterprise investment scheme (SEIS):
- The amount a company can raise under SEIS has been raised from £150k to £250k
- The amount an individual can invest in SEIS shares has been doubled from £100k to £200k
- The scheme has been extended to companies with gross assets under £350k
Energy price guarantee and Energy Bill Relief Scheme:
Businesses will pay no more than £211 per megawatt hour for electricity and £75 per megawatt hour for gas. This applies to all energy supply contracts entered into after 1st April. The energy companies will apply the discount. The energy bill relief scheme will operate until March 31st 2023, with a potential extension for businesses in certain sectors.
Under the energy price guarantee, the highest amount domestic households will have to pay is 34p per kWh of electricity and 10.3p per kWh of gas. Additionally, the standing charge that customers pay for being connected to the energy grid will be:
- 46p per day for electricity
- 28p per day for gas.
This energy price guarantee will last 2 years. A typical household can expect to pay about £2500 a year for their energy.
Investment zones: These new investment zones will benefit from tax incentives, planning liberalisation and wider support for the local economy.
VAT-free digital shopping scheme for visitors to the UK: Visitors to the UK will be able to claim back VAT on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage. The date for this scheme to go live is currently unknown.
What do you need to know?
If you run your own payroll, then you will need to check that your payroll software provider will be implementing the changes to National Insurance in time for November. If we run your payroll, we will ensure that the changes happen seamlessly.
Personal tax return:
The changes to income tax rates and national insurance take effect for the 2022/2023 tax year. They will not impact your personal tax bill for the 2021/2022 tax year. With 2 rates of National Insurance, this will make your 2022/2023 personal tax return more complicated than normal. Please contact us if you would like us to do your personal tax return for the 2022/2023 tax year.
Do a new budget and re-forecast your cashflow:
The energy price guarantee and changes to employers’ national insurance rates mean that your business’s costs have materially changed for the year. Please contact us if you want help to see how this changes your business’s cost structure going forward.
Revisit your personal and business tax planning strategy:
This was anything but a mini-budget. It is a massive change in fiscal policy and direction. This means you may need to rethink your personal and business tax planning strategy going forward. Changes, in particular to the SEIS scheme, may mean there are more tax planning options open to you and your business.
Have any other questions arisen from this blog post? Get in touch with us if you have any questions or need help to incorporate the new changes.