Following the new Chancellor of the Exchequer’s mini-budget, which took place on Friday 23rd September, National Enterprise Network have pulled together the key elements which could have an impact on start-up and small businesses.
Following the new Chancellor of the Exchequer’s mini-budget, which took place on Friday 23rd September, National Enterprise Network have pulled together the key elements which could have an impact on start-up and small businesses.
Energy bills support
Ahead of the mini-budget the government announced a new Energy Bill Relief Scheme. This involves the government providing a discount on wholesale gas and electricity prices for all UK businesses for a six-month period from 1st October 2022. Businesses do not need to contact suppliers as the discount will automatically be applied to their bills.
Corporation Tax frozen
The UK’s corporate tax rate was due to rise to 25% for those making profits over £50,000, this will now not take place and will remain at 19%.
National Insurance rise cancelled
In April 2022, National Insurance increased by 1.25% for one year with plans for a Health and Social Care Levy to be brought in from April 2023 to replace this.
The increase will now be reversed from 6th November 2022 and the Health and Social Care Levy has been cancelled.
This means that from 6th November 2022, National Insurance rates will revert to:
- Class 1 Employee’s National Insurance: 12%
- Class 1 Employer’s National Insurance: 13.8%
- Class 4 National Insurance for the self-employed: 9%
Class 2 National Insurance for the self-employed was not affected by the increase last time and therefore will not be changed.
Cuts to Income Tax rate
The basic rate of Income Tax for England and Northern Ireland will be cut from 20% to 19% from April 2023.
The current top rate of Income Tax for those earning £150,000 or higher will be abolished from April 2023 in England, Wales and Northern Ireland.
IR35 reforms repealed
The Chancellor announced that the reforms made in 2017 and 2021 for the IR35 will be repealed from April 2023 to try and simplify taxes.
Reforms to IR35, introduced in April 2021, required workers routinely working with the same contractors to be counted as PAYE staff, or face action from HMRC.
This means that from April 2023 it will become solely the responsibility of the contractor, not the employer, to determine whether or not their work comes under IR35. The contractor will determine if their work should be taxed as employment income and will be responsible for paying any additional tax and National Insurance.
Seed Enterprise Investment Scheme (SEIS) fundraising limit raised
SEIS is designed to help a company raise money when it’s starting to trade. It does this by offering tax reliefs to individual investors who buy new shares in the company.
In the latest budget a company can now receive a maximum of £250,000 through SEIS investments (previously it was £150,000). This will:
- include any other de minimis state aid received in the 3 years up to and including the date of the investment
- count towards any limits for later investments through other venture capital schemes
This will also now be safeguarded past 2025, alongside the Enterprise Investment Scheme and Venture Capital Trust.
Increase in tax rate on dividends reversed
In April 2022 the rate of Income Tax charged on dividend income was increased by 1.25%.
This will be reversed from April 2023, so that dividends will be taxed at 7.5% and 32.5% for basic-rate and higher-rate taxpayers.
Investment Zones to provide tax reductions
As part of The Growth Plan 2022, the Chancellor announced the intention for 38 local authorities to establish investment zones in England.
Investment Zones will unlock housing across the UK through lowering taxes and liberalising planning frameworks to encourage rapid development and business investment.
Businesses in designated areas in investment zones will benefit from 100% business rates relief on newly occupied and expanded premises.
In addition, businesses will receive full stamp duty land tax relief on land bought for commercial or residential development and a zero rate for Employer National Insurance contributions on new employee earnings up to £50,270 per year.
To incentivise investment there will be a 100% first year enhanced capital allowance relief for plant and machinery used within designated sites and accelerated Enhanced Structures and Buildings Allowance relief of 20% per year.
https://www.gov.uk/government/publications/the-growth-plan-2022-factsheet-on-investment-zones
If you want to find out more about how all of these changes could impact your income or your business, please visit the government websites listed for further details.
National Enterprise Network welcome some of this support but we believe that more could be done regarding business rates, VAT and other costs to further support start-up businesses and SME’s who are crucial to the UK economy. We will work with the Department for Business, Energy and Industrial Strategy to ensure that the voices of enterprise continue to be heard during challenging times.
