Chancellor Rishi Sunak announced what he claimed today were a package of measures to help businesses weather the perfect storm of increased National Insurance payments, rising energy prices due to the war in Ukraine and increasing inflation.
In this article, we’ll delve into some of the key points and explore what they’ll mean for business owners.
From 6 pm on 23 March 2022, fuel duty on petrol and diesel has been cut by 5p per litre for 12 months.
The government estimates this cut, plus the freeze in 2022-23, represents a £5 billion saving over the next 12 months, worth around:
- i. £200 for the average van driver
- £1,500 for the average haulier
Support for workers
In the Spring Statement, it was announced that the basic rate of income tax will go from 20% to 19% but not until the end of Parliament in 2024, and the annual National Insurance Primary Threshold and Lower Profits Limit increases from £9,880 to £12,570 from July 2022.
The Employment Allowance is a relief that allows eligible businesses to reduce their employer National Insurance contributions (NICs) bills each year.
It was announced that it would be increased from £4,000 to £5,000. This, in effect, gives a tax cut to 495,000 businesses of up to £1000 per employer, including around 50,000 businesses which will be taken out of paying NICs and the Health and Social Care Levy entirely. This comes into effect in April 2022.
From April 2022, green technology, including solar panels and heat pumps, will be exempt from business rates. This will save businesses an extra £35 million in 2022-23 and is expected to be worth around £170m over the next five years to support the decarbonisation of buildings.
In addition, there will be a 100% relief for eligible low-carbon heat networks which have their own rates bill.
This is on top of reducing the VAT on energy savings materials (ESM) from 5% to 0%, further incentivising homeowners to buy ESMs from businesses as part of a broader package of Government measures to improve energy efficiency.
Reforming R&D tax credits
From April 2023, a business will be able to claim tax relief on all cloud costs associated with R&D. This will allow companies to claim expenses related to the storage of vital data and support those data-heavy sectors, including AI, robotics, manufacturing, and design.
Draft legislation is expected to be published this summer.
Encouraging Business Investment
In March 2021, the government announced the super-deduction – a temporary enhanced first-year capital allowances that for every pound a company invests, their taxes are cut by up to 25p – this will end in April 2023.
To ensure businesses continue to invest, the Chancellor announced a series of potential policy changes to the UK’s existing capital allowances regime, which the government will consider ahead of April 2023. These policies will encourage business investment once the super-deduction ends to drive forward productivity growth. The government will engage with business organisations from now until the Autumn.
In the Autumn Budget, the government announced the following business support packages that come into effect from 1 April 2022;
- Eligible businesses will now be able to receive a temporary business rates relief
- Freezing the business rates multiplier for another year
- Increasing the Annual Investment Allowance from £200,000 to £1 million until March 2023
- Extending the transitional relief for business rates and supporting small business schemes for 2022-23,
- Establishing Help to Grow provides SMEs with the tools they need to innovate, grow, and help drive economic recovery. For example, the government is helping firms to adopt new digital technologies by offering eligible SMEs a 50% discount on approved software worth up to £5,000.