mini budget

What’s happening with the mini budget?

This month we were all ready to talk about Kwasi Kwarteng’s mini budget and how it would affect small businesses.

It was all written and ready to go.

Then, everything changed.

Kwasi’s out, and Jeremy’s in. Most of the plans of the mini budget have gone through the shredder, leaving only the stamp duty and national insurance reversal in place.

So, where are we now? Well, pretty much back to where we were

Corporation Tax was to remain at 19% – CANCELLED

Not anymore. Under the revised budget, Corporation Tax will rise to 25% from April 2023. However, the announced small profits rate of Corporation Tax will remain. That means smaller or less profitable businesses will not pay the full 25%, and companies making less than £50,000 profit will see no increase and continue to pay the 19% rate.

National Insurance rise reversal

The NI rise reversal is staying. Back in March 2022, the then Chancellor, Rishi Sunak, increased National Insurance contributions (NICs) by 1.25% for 12 months, which was then to be followed by the permanent introduction of a 1.25% Health and Social Care Levy.

However, both have now been scrapped. According to the Government, about 920,000 UK businesses will get a tax reduction of nearly £10,000 as a result.

Energy bills support – SHORTENED

This is possibly the most controversial of all.

Jeremy Hunt announced that the energy price guarantee will now only be in place until April 2023, at which point a Treasury-led review will be taken to see what measures should be put in place after that date.

Repeal of IR35 off-payroll updates – CANCELLED

IR35 was introduced in 2000 as an anti-tax avoidance measure. It made sure the correct tax was paid between independent contractors and clients. Contractors had to assess and declare whether their contract with a client was:

  • Inside IR35 – meaning they were employees and should be taxed on a PAYE basis
  • Outside IR35 – meaning the contractor would be responsible for their own tax and National Insurance

It was amended in 2017 and again in 2021 with so-called ‘off-payroll updates’ so that the client business became responsible for defining the IR35 status of every new contract with an independent contractor.

Despite complaints that the update itself was poorly rolled out and was “a mess” and “confusing”, the proposed repeal has been cancelled.

The return of tax-free shopping – CANCELLED

Sorry, tax-free shopping for international travellers is not coming back anytime soon

Launching low-tax Investment Zones – CANCELLED

With the proposed Investment Zones being scrapped, there’ll be no reduced tax burdens for businesses and individuals.

What do these changes to the mini budget mean for businesses?

The Liz/Kwasi original mini budget led to rising interest rates and a slump in the value of the UK currency.

For small businesses, this dramatic slump in the pound’s value meant an escalation in the cost of importing goods or raw materials from neighbouring countries as the value of sterling fell relative to the euro.

Although the new budget isn’t exactly setting the business world on fire, it is at least helping stabilise our economy, which was heading into free fall.

Only time will tell what the long-term consequences will be, as we’re pretty sure there will be a few other changes happening in the future.

Time wise VA works with small- to medium-sized businesses to make their working day that little bit easier. Call the team on 0161 211 9837.

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