Chancellor Rishi Sunak unveiled his highly anticipated Spring Statement this afternoon amid the growing cost of living crisis. His measures were highly criticised by the shadow chancellor Rachel Reeves, who said they don’t go far enough to help struggling families and businesses. Here are some of the key measures affecting small firms…
1. Tackling the cost of living crisis
Rising costs of essentials such as petrol, energy and food are crippling consumers. Here’s how the government plans to support people’s personal finances:
- Immediately cutting fuel duty on petrol and diesel by 5p per litre for 12 months.
- Help with energy bills via a £200 reduction this autumn to be paid back over the next five years. Households in Council Tax bands A-D in England will also receive a non-repayable rebate of £150.
- Raising the National Insurance thresholds to £12,570 from July 2022.
- This will mean working people will be able to earn £12,570 tax free – a tax cut worth over £330 for a typical employee in the year from July 2022.
- It is also cutting income tax in 2024 – the first cut to the basic rate in 16 years – meaning taxpayers will be £175 better off on average.
- From April 2023 onwards, the self-employed will be able to earn £12,570 before paying any NICs.
2. Increasing the Employment Allowance
In a move that will be welcomed by SMEs, the Employment Allowance will rise by £1,000 from £4,000 from April 2022.
Employment Allowance is a relief that allows eligible businesses to reduce their employer National Insurance contributions (NICs) bills each year.
Around 495,000 businesses (30 per cent of all businesses) will benefit from this increase, including around 50,000 businesses (3 per cent of all businesses) that will be taken out of paying NICs and the Health and Social Care Levy entirely.
3. Planning to encourage greater business investment once the super-deduction ends in 2023
- The government has announced a series of potential policy changes to the UK’s existing capital allowances regime, which it will consider ahead of April 2023.
- These policies will aim to encourage business investment once the super-deduction ends to drive forward productivity growth.
- The government will be engaging with business organisations and other interested parties from now until the Autumn.
These announcements boost the existing business support package, which includes:
- As announced in Autumn Budget 2021, eligible businesses will now be able to receive a temporary business rates relief worth almost £1.7 billion from 1 April.
- Freezing the business rates multiplier for another year saving businesses £4.6 billion over the next 5 years
- Introducing the temporary super-deduction, the biggest two-year business tax cut in modern British history. Under the super-deduction, for every pound a company invests, their taxes are cut by up to 25p
- Increasing the Annual Investment Allowance to £1 million – the highest level of support for capital expenditure ever provided through the AIA and a generous incentive to invest for over a million SMEs, providing full expensing for all SMEs
- Extending the transitional relief for business rates and supporting small business schemes for 2022-23, which will restrict bill increases from between 15 per cent to 25 per cent for SMEs. The extension of these schemes is estimated to save businesses £30 million, protecting small businesses from significant bill increases before the 2023 revaluation
- Establishing Help to Grow, which is giving SMEs the tools they need to innovate, grow, and help drive our economic recovery. As a result of the scheme 90 per cent of survey respondents have made changes or are planning to make changes to the way they manage, organise or operate their business