Today's Budget - 7 Things you Need to Know for SMEs
Posted on 17th November 2022 at 17:00
Following the short-lived last government, today (17 November 2022) saw the announcement of the latest Budget from the new Chancellor, Jeremy Hunt. Here is a round-up of the key announcements that will impact SMEs in the coming weeks and months from our friends at Funding Circle:
1. New support coming for business energy bills
The Government announced the Energy Bill Relief Scheme (EBRS), which aims to provide businesses with support to tackle rising energy bills. Beginning on 1st October 2022, it offers discounted gas and electricity unit prices for those on non-domestic contracts.
Originally, this support was to last 2 years. However, Mr Hunt, confirmed that this support would stay in place until April 2023.
2. Upcoming rise in Corporation Tax to go ahead
Corporation Tax was due to rise from 19% to 25% from April 2023. But Mr Kwarteng announced this would be scrapped and current rates frozen.
Mr Hunt has reversed this, and the upcoming rise will still go ahead. Corporation Tax will now rise to 25% from April 2023.
3. National Insurance contributions are being cut
National Insurance contributions are to be cut by 1.25%, returning them to the levels before the new Health and Social Care Levy was introduced. This will come into effect on 6th November 2022.
For business owners who are self-employed, this will mean that you’ll be able to keep more of the salary you pay yourself.
In addition, for businesses that employ staff, the Employment Allowance increase from April 2022 hasn’t been cancelled. This means that businesses with National Insurance contributions of less than £10,000 can claim back up to £5,000 (which is up from £4,000 previously before April 2022).
The Government outlines that this Employment Allowance increase, combined with the cancelled Health and Social Care Levy, will mean 40% of businesses won’t pay any National Insurance contributions as of 6th November 2022.
What has changed:
Nothing – Mr Hunt is keeping this policy in its current form.
4. Income tax reductions no longer going ahead
The planned income tax reduction was to come into effect from April 2023, and would’ve seen the basic rate of income tax reduced from 20% to 19%.
At the same time, the 45% tax band for people who earn over £150,000 would be abolished.
What has changed:
Neither of these will now go ahead. Mr Hunt has said, while cutting tax is still a principle they hold, it won’t be possible in the current climate and these tax bands will stay as they are for the foreseeable.
5. IR35 reforms are to stay
Back in 2021, responsibility for working out IR35 status was shifted from contractor to client for medium and large-sized businesses in the private sector. It mirrored a change in public sector reforms that were introduced in 2017.
These were to be scrapped as the Government felt they had ‘added unnecessary complexity and cost for many businesses’.
What has changed:
Mr Hunt has now confirmed that these IR35 reforms will remain in place.
6. Cuts to Dividends Tax have been reversed
In April 2022, dividend tax bands were increased by 1.25%, to match the additional 1.25% increase in National Insurance contributions.
These increases were due to be reversed, reverting dividend tax rates to 7.5%, 32.5% and 38.1%.
Mr Hunt has now confirmed that the cuts to dividend tax rates will not be going ahead. Dividend tax rates will remain at 8.75%, 33.75% and 39.35%.
7. National Minimum Wage
Large minimum wage increases help protect low-paid workers’ living standards. Minimum wage rates from April 2023 have now been announced. Apprentice and under 21s rates have also increased. Full rates here
The National Living Wage (NLW) will rise to £10.42 from 1 April 2023, an increase of 92 pence or 9.7 per cent.
It is important especially at this time of year, when many organisations are looking towards their new financial year, that these changes are taken into account. Of particular note is the increase in minimum wage, which will impact not just workers at the minimum wage but also those only just above this level, where it may become necessary to push up wages to maintain a differentiator between minimum wage and lower-wage jobs.
More details on changes from Funding Circle
Tagged as: #businessowner #budget #smallbusinessmatters
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