The “Mini-budget” and what it means for your business.
Whilst certain policies within the recent “mini-budget” have proved a distraction amongst the media and general public alike, the response from the business community on some of the lesser-publicised aspects of it has general been more favourable. In response to what he called “pro-small business measures,” Martin McTague, the National Chair of the Federation of Small Businesses (FSB), expressed his support for the Truss administration and expressed satisfaction that it “recognised that removing taxes on jobs, investment and entrepreneurs is essential for our economy.”
The British Chambers of Commerce’s (BCC) Director General, Shevaun Havilland, was equally fervent in her support for the new policies, declaring that “businesses across the UK will enthusiastically welcome the Chancellor’s pledge to focus on economic growth and speed up new infrastructure development”
So what does the mini-budget actually mean for you and your business? We’ve compiled a short breakdown of the key aspects, both good and bad.
Key Takeaways
- National Insurance Contributions will be lower.
- Energy bills are frozen for at least six months.
- Corporation Tax will stay the same for another year.
- You could now be eligible for the Seed Enterprise Investment Scheme (SEIS)
- New Investment Zones
- IR35 made simpler for
- Your Annual Investment Allowance (AIA) will stay the same.
National Insurance
In April 2022, National Insurance Contributions (NICS) were increased by 1.25%. This increase will be reversed from November 6th 2022.The Chancellor predicts that paying less in NICs will aid your business in saving as much as £10,000 next year. These extra funds can be used however you choose, whether that’s investing or raising funds.
Energy Bills
As part of their new pledges on the Energy and Cost-of-living crises, the government announced the Energy Bill Relief Scheme is designed to help businesses through the winter. The scheme is designed to ensure that the amount you pay will be capped at ‘government supported prices’ for six months from October 1st 2022.
- £211 per megawatt hour (MWh) for electricity
- £75 per MWh for gas
Registration for the scheme is an automatic process and energy suppliers will automatically apply the relevant discount. You will only pay the discounted rate and the government will pay the difference to your supplier. If your business is paying less than the government support prices then your energy bill will not be affected by the scheme.
Corporation Tax
Under the previous government, the former Chancellor, Rishi Sunak announced that Corporation tax would increase from 19% to 25% in April 2023. That increase would be an immediate change for businesses with more than £250,000 yearly profit and an incremental change for businesses making between £50,000 and £25,000 yearly profit.
The new Chancellor announced that this increase will now not go ahead and businesses will continue to pay 19% corporation tax next year. Those business owners that had already accounted for the 2023 increase now how extra cash on their hands.
Seed Enterprise Investment Scheme
The Chancellor’s growth plan has updated the long-standing government-sponsored Seed Enterprise Investment Scheme (SEIS). Kwarteng stated that the SEIS would be expanded to offer additional money to start-ups and young businesses.
The program’s goal is to promote venture capital investment in start-up and early-stage companies by providing investors with tax breaks and other incentives. Of course, there are requirements for qualifying based on your company’s worth and trading history. Additionally, there are restrictions on how much money you may raise and how much money investors can contribute in a given year.
The most significant adjustments are being made in these areas for businesses:
- You are now eligible for the SEIS if you’ve been trading for three years (up from two years)
- The average gross value of assets set out in the eligibility criteria has been increased from £200,000 to £350,000
- You can now raise up to £250,000 whereas you could previously you could only raise £150,000
New Investment Zones
The Chancellor’s announcements also included the development of 38 new regions in England that will be given consideration for Enterprise Zone classification. Local governments will choose the ideal locations within their jurisdictions. Relief from business rates, lower National Insurance premiums for new hires, and lower stamp duty are among the advantages for businesses. No timeframes have been specified yet, other than to indicate that it will proceed as soon as feasible.
IR35 made simpler
Originally introduced in back in 2000 as a tax-avoidance deterrent designed to ensure that the correct amount of tax was paid in contracts between independent contractors and their clients. Contractors, therefore, had to declare whether their contract with a client was:
- Inside IR35: they are employees and should be taxed on a PAYE basis
- Outside IR35: The contractor would be responsible for their own tax and National Insurance
Amended in 2017 and again 2021 with “off payroll updates,” meaning the client business now had to determine the IR35 status of every new independent contractor. The result was that businesses became more cautious and often more hesitant about hiring freelancers and independent contractors.
Kwasi Kwarteng’s announcement repealing the 2017 and the 2021 updates will be seen as good news by many larger businesses that struggled with the complexity of the new regulations and the excessive time that compliance entailed.
Annual Investment Allowance
In April 2023, the amount of tax relief on capital expenditures was scheduled to decrease from £1,000,000 to $250,000. The ruling has been overturned, and the relief amount will now always be £1,000,000. Companies still have access to the 130% super deduction rate through March 31, 2023, therefore any CapEx should be considered as soon as possible.
We Can Help
Most businesses are likely to experience some level of financial problems at one point or another, and you will not be surprised to learn that it is one of the predominant causes of business distress and failure. It is for these reasons that business owners should always try and carefully manage their business’ cash flow to ensure it is fit for purpose and can survive tougher financial times. While this “mini-budget” goes some way to alleviate the inevitable stresses that the current uncertain financial climate will entail, some businesses will still struggle.
If your need more help with cash flow or funding then Quantuma Direct is well placed to advise you. We will work with you to understand the root causes and devise a workable plan to help your business recover. We will never charge a fee for an intial consultation, we will listen in order to understand your current situation and unique circumstances. We will present you with a plan, allowing you to fully consider your next steps before making a decision.
