The ‘Mini-Budget’ (Growth Plan) Small Business Highlights

Kirsty Young News, Tax

Officially, it wasn’t a mini budget, or even a fiscal statement. The Chancellor Kwasi Kwarteng set out the government’s ‘Growth Plan’ on Friday 23rd September.

Whatever you call it, however, the plan included some mega announcements that will really impact the small business world.

Here we just give you the top highlights of the announcements, relevant to small business owners.

 

Corporation Tax rate rises are scrapped

The corporation (business) tax rates were due to rise to 25%. The announcement keeps the rate at 19%, which will be welcome news to small business owners.

 

Health and Social Care Levy is being scrapped

The previous announced (and currently in play) Health and Social Care Levy is being scrapped. This will effectively mean a reduction in National Insurance by 1.25% for everyone, including employers’ contributions.

This is positive news for everyone’s pockets, and especially for employers already struggling to fund the extra contributions. This will come into play from November 2022.

 

Dividend tax rates are going down

The dividend tax rates went up 1.25% in line with the new ‘Health and Social Care Levy’. This change is being reversed as part of the wider changes to the levy.

So, the tax rate on dividends over the allowance will return to 7.5%. This comes into play from 6th April 2023.

 

The basic rate of income tax will be 19% (and coming soon)

This drop in the basic rate of income tax had been previously announced but is now being brought forward to 6th April 2023. The basic tax rate has been 20% for many years and is the lowest rate ever.

 

So… the shocking one. The ‘Top’ rate of income tax is gone – and then back again!

Sunday night, it was gone. Monday, it was back. That’s politics for you.

Those lucky enough to earn over £150,000 a year generally pay 45% on earnings above that. This rate was to have been removed from 6th April 2023. This would have meant that top earners would be charged a straightforward 40% on all income over (currently) £50,271, in line with the ‘higher’ rate of income tax.

However, in a U-turn so spectacular you could almost hear the government tyres screeching, the chancellor stated in a speech to the annual Conservative government that:

“I listened to people, spoke to colleagues, spoke to some people in the country, and felt the best thing to do was to not proceed with the abolition of the 45p rate, simply because it was just drowning out the other elements of the plan.”

So, as you were, top earners.

 

IR35 Rules will be put back to what they were

For those in the contracting/professional services contracts market, you will have heard the term IR35. The Chancellor announced that on 6th April 2023, they are putting the rules back to the way they were before recent changes came in 2017 and 2021. This should stop small business contractors being forced into umbrella companies.

What the market does in practical terms remains to be seen…..

The contractor will once again be responsible for the decision (and liability for getting it wrong) for whether they are ‘inside’ or ‘outside’ IR35.

 

Summary

There are many positive announcements for the small business world. Whilst many of the announcements should really help support small business growth. we are still trying to work out which is the greater surprise: the initial abolishment of the top rate of income tax or the subsequent dramatic about-face…

At least the U-turn appears to have helped the GBP exchange rate, boosting to back to almost previous levels, and is therefore good news for UK businesses who import or export.

The full details of all the announcements can be found HERE.

 

Struggling to understand the implications of the announcement?

Ask your accountant or book a consultation with us. We offer a paid 1 hour, 1-2-1 consultation so you can ask simple questions of an accountant. You don’t have to become a client, so it’s a great way for you to get the help, when you need it.