UK chancellor Kwasi Kwarteng has unveiled what he claims are the biggest tax cuts of a generation. So how will this impact small businesses? Do we finally have a Conservative government doing conservative things??

I was always a little underwhelmed by Rishi Sunak’s budgets. The last one especially really had very little in it to help small businesses recover from the hardest economic conditions of recent history. After the eternal disappointment of Boris, do we finally have a government taking steps in the right direction?

What are the core benefits for business in the UK?

It’s Liz Truss’ turn and her chancellor, Kwasi Kwarteng, has put together a package of measures that may genuinely see us turning a corner. This is known as The Growth Plan 2022. So what’s in the 2022 mini budget for small businesses?

Corporation tax rises scrapped

For limited companies, corporation tax will no longer increase to 25%. It will remain at 19% for all businesses. Previously there was a tapered increase for businesses making over £50,000 profit per year from April 2023. This is now gone.

Income tax reduced to 19%

The basic rate of income tax will reduce from 20% to 19%, matching corporation tax. As a self employed individual this will reduce the overall tax liability on your business profits. It will also reduce the income tax overhead for employees and directors of limited companies. This tax drop will take effect from April 2023.

45% top rate tax band scrapped

The 45% tax band was always a bit of showboating. That rate is now gone. The top tier income tax rate will now be 40%. Hopefully this will encourage investment and help to retain experienced higher earners. Again this is from April 2023.

1.25% National Insurance rise scrapped

The increase of National Insurance to 1.25% (came in to effect in April 2022) will be reversed from November.

IR35 rules scrapped?

Am I reading this right? We’re finally getting rid of the atrocious mess that was IR35?? I’ll believe it when I see it, but apparently that ridiculous project has been knocked on the head. A welcome change for all contractors out there. From 6th April 2023 workers across the UK providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs. Well done to all involved for pressuring the government to scrap this – success at last!

1.25% dividend tax increase scrapped

A very welcome boost for entrepreneurs, directors and investors – the 1.25% dividend tax increase will be reversed from April 2023. That means the lower rate will revert back to 7.5% from 8.75%.

AIA frozen at £1m

The Annual Investment Allowance will be indefinitely frozen at £1m. The AIA allows businesses to invest in capital equipment such as machinery and off-set the expense against profits of a single year, as opposed to depreciating the asset over several years. This greatly helps with business cashflow.

New Investment Zones

In a bid to drive growth and unlock housing across the UK, the government are in discussions with 38 local authorities to establish investment zones in England. More flexible planning regulations and tax incentives to encourage rapid development and business investment. I suspect this is a boost for big builders and will do little to encourage smaller developers, but we shall see.

SEIS increases to £250,000

The Seed Enterprise Investment Scheme (SEIS) will allow companies to raise up to £250,000 of SEIS investment from April 2023. The gross asset limit will be increased to £350,000 and the age
limit from 2 to 3 years. The annual investor limit will be doubled to £200,000.

CSOP doubles to £60,000

The Company Share Option Plan (CSOP) will allow qualifying companies to issue up to £60,000 of CSOP options to employees, double the current £30,000. Again, from April 2023.

What’s the Andy Mac judgement of this mini budget?

Obviously whatever any government does, people will moan… including myself. But at first glance this has more in it for business than I’ve seen in any budget over the last… 20 years? So from that standpoint it’s impressive. Is it enough to stop the UK going in to recession? Probably not. Covid lockdowns hammered the UK economy and we’ll pay the price of that for many years to come.

On the surface though it could help us break out of a recession sooner.

What I’d like to see in future budgets

Reform VAT thresholds and base them on profits rather than turnover

Inflation is making a mockery of the current £85,000 VAT registration threshold. Base the VAT threshold on profit rather than turnover. This gives smaller, high turnover, low profit businesses the option to register if they want and would boost growth for thousands of businesses who currently ‘turn off’ when they get close to the limit.

Scrap MTD ITSA

Making Tax Digital for Income Tax Self Assessment is going to be a disaster. Make it entirely voluntary instead of mandatory and the government need to provide free bridging software for VAT and ITSA.

Start the UK Tax Year on 1st Jan

PLEASE can we reform the tax year to start on 1st Jan instead of the ridiculous 6th April?? This may sound trivial but it has long-term implications with regards to alignment of VAT quarters with income tax quarters. Most of the developed world start their fiscal year on 1st Jan. In makes sense.

Scrap CDBC-related projects

The implications of a world run on CDBCs is terrifying. Stop it. Let the market run crypto and stop putting your oar in. It’s creepy as ****.

Thank you.

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Last Updated on 23 September 2022 by Andy Mac

Andy Mac

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