What Does the Announced ‘Mini Budget’ Mean for Businesses

What Does the Announced ‘Mini Budget’ Mean for Businesses?

On 23rd of September 2022, newly appointed Chancellor of the Exchequer, Kwasi Kwarteng announced a range of shocking plans that businesses are still digesting. Some highly beneficial moves, others may seriously impact British businesses moving forward. We summarise the key points and potential ramifications are moving forward.

Government Sets 2.5% Growth Target in Mini Budget- Is This Achievable?

With challenging times ahead; the new regime is hoping to tackle multiple issues such as rising bills, fuel costs and a shrinking economy. This is to be done by attacking the source – growing businesses of all sizes during a struggling period.

An ambitious target of achieving a 2.5% trend rate of growth at the moment is a number on a sheet. Time will tell if this is reaching too far and unrealistic. The new government has promised cuts which look promising for an economy staring with the highest inflation figures we’ve seen in decades.

There are on Stamp Duty Land Tax which will help homeowners. An additional 200,000 in the UK now able to purchase without paying stamp duty at all. They’re also planning on tackling several difficulties businesses are facing currently.

1.    Government Scrapping Planned Corporation Tax Increase

An interesting development, following the announcement of the Mini Budget is the decision to not increase corporate tax as planned. Initially penned in at 25%, Kwarteng is keeping it at 19%, the lowest rate of corporation tax in the G20.

As the previously announced 6% increase by former Chancellor Rishi Sunak was seen as a 50/50 split between risky and bold, this could help to bring down inflation.

2.    Share Options for Employees Doubled

There is good news for employees that have the opportunity to invest in share options. As a bonus for any staff that are currently set at a maximum based on the market value at a grant of £30,000. Instead, this will increase to £60,000 from the 6th of April, 2023 with existing options unaffected by this change. An exciting incentive for all who like to invest in their future.

3.    Freeze on Energy Bills

The doom and gloom have officially set in with bills already at an all-time high and that number is expected to increase during the Winter of 2022-23. As a welcome boost to businesses, the government announce a freeze on energy bills to reduce inflation by 5%, according to their projections. The Energy Bill Relief Scheme could halve the cost of business energy bills to reduce the deficit.

4.    Annual Business Investment Allowance Remains £1 million

Another welcome change to the Mini Budget is the permanent switch to allow businesses a £1 million investment tax-free. This was previously set at £200,000 and will not change back, instead remaining at the current amount and creating tax relief to invest in a variety of areas within businesses.

5.    No Business Rates on Commercial Properties says Mini Budget

One way to incentivise businesses is by altering one of the largest overheads. Kwarteng turned a few heads himself when he announced no business rates will have to be paid when businesses occupy new premises. This is an exciting development, especially for small businesses. While this will reduce the money put back into local authority services, it will help the little guys get off the ground during challenging times for all businesses.

6.    Planned National Insurance Increase Removed

Interesting developments with national insurance. The government scrapped the planned Employer National Insurance Contributions and dividends tax, as well as the proposed 1.25 percentage point rise in National Insurance, which from the 6th of November is reversed. This will supposedly save 920,000 businesses almost £10,000 on average next year.

7.    Proposal to Change IR35 Rules

Another positive step which will be fully welcomed by many contract workers is the reversal of the IR35 rules implemented between 2017 and 2021. Initially, these rules switched the obligation towards employees to sort out any tax deductions for contractors as the government believed there were too many to manage across the UK. However, the new Chancellor has chosen to repeal this form, meaning the onus is back on contracted workers to sort out their tax and other deductions.

Conclusion

Overall, there has been a raft of changes, some great for businesses and others that could risk the future of many businesses for years to come. With talks of Truss potentially reducing VAT from the traditional 20% to 15% and startups seeing new schemes that create tax relief for investors, as well as those reversals of tax implementations mentioned above, at the moment it’s now just a waiting game to see whether the proposed changes via the Mini Budget will have a positive or negative impact on the UK economy.

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