Chancellor’s “mini budget” – what does it mean for businesses?

1. National Insurance contributions

The government has scrapped the rise in Employer National Insurance Contributions and dividends tax that were introduced to pay for a Health and Social Care Levy. The cut will come into effect from November 6. 

2. Corporation tax

Corporation tax is also changing – or rather, it is staying the same. 

The previous PM Boris Johnson planned to increase corporation tax from 19% to 25% in April 2022; this has been scrapped, Chancellor Kwasi Kwarteng announced. 

3. Annual Investment Allowance

The Annual Investment Allowance, which allows companies to deduct the full cost of a qualifying item when calculating taxable profits, is to be set at £1m from April 1 2023. 

This means businesses can benefit from 100% tax relief on their plant and machinery investments to the value of £1m. 

4. Investment Zones

The government has also announced the creation of special investment zones which will encourage productivity and boost jobs in specific locations. 

The government is in discussion with 38 local and mayoral combined authority areas in England. The initiative will also be rolled out in Scotland, Wales and Northern Ireland.

The zones will provide businesses with targeted and temporary tax cuts.

5. IR35

Chancellor Kwasi Kwarteng announced that the IR25 reform that recognises contractors as employees for tax purposes will no longer apply from April 2023. 

Like before, contractors will be responsible for their own tax. 

6. Investment schemes

The Enterprise Investment Scheme, Venture Capital Trusts and the Seed Enterprise Investment Scheme are to be extended beyond the 2025 Sunset Clause.

The Seed Enterprise Investment Scheme (SEIS) will now allow businesses to now raise £250,000 – an increase of 66%.

7. Company Share Option Plan

Previously, the company share option plan (CSOP) enabled businesses to offer employees share options of up to £30,000. This is being raised to £60,000.

Fuel duty, reduced VAT rates for businesses and the issue of business rates were among the points not discussed in Friday’s “mini budget”. 

A full Autumn Budget is expected later this year, the date of which is yet to be announced. 

Funding for businesses

While the Chancellor’s announcement may bring some relief to SMEs, we understand that many businesses might still require funding. 

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