On Friday Kwasi Kwarteng delivered his budget which though dubbed ‘mini’ is probably the most significant for small business for many years. Here is our summary:

Income Tax

• The basic rate has been cut by 1p to 19p from April 2023. 

• From April 2023, the higher rate of Income Tax, 45%, has been scrapped.

Corporation tax

• 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.

National Insurance

• 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.

• There is no change to the threshold that individuals pay National Insurance, i.e. £12,570.

• Eligible businesses still get up to £5,000 in employment allowance to reduce their annual National Insurance Liability. 

dividend tax

• The 1.25% increase to rates introduced in April 2022 will be reversed from April 2023 reverting to 7.5% for Basic Rate and 32.5% for Higher Rate.

IR35

• The 2017 and 2021 changes to off-payroll working are to be repealed from April 2023.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 Plans

• From April 2023 companies will be able to 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 and potentially be extended after this date 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. The standing charge - the fee customers pay for being connected to the energy grid - will be 46p per day for electricity and 28p per day for gas. This energy price guarantee will last 2 years. A typical household can expect to pay about £2,500 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.

Commentary

There is clearly a huge amount in this budget to benefit small business owners. The main concern for small business owners will be the effect on the economy. The budget was not subject to review by the Office for Budget Responsibility. The suspicion is that the country is already in recession and whilst the budget is designed to boost growth, many commentators fear it will feed inflation which in turn would necessitate the Bank of England increasing interest rates.

In addition it is feared that budget deficits may balloon to the point where large tax rises become unavoidable.

Early signs were not favourable as the value of Sterling collapsed against the Dollar so the most immediate effect business owners may notice is the cost of imports increasing.