How the Budget announcements in March are affecting businesses now
If you are a business owner, you will likely have been waiting for the Spring 2022 Budget delivered by Chancellor of the Exchequer Rishi Sunak on 23 March.
With inflation rising and the impact of the pandemic still being felt, many business owners were hoping for some help. Let us look at how the Budget announcements are impacting on businesses three months on.
National Insurance
The Chancellor announced that the National Insurance threshold would be £12,570, which means it has been raised by £3,000. Effective from July 2022, this should give 30 million people an additional £330.
However, for business owners who also manage the company, there was a rise of 1.25 percentage points in the National Insurance contributions. Because this applies to both employer and employee, business owners and managers will see a double increase of 2.5 percentage points.
It is uncertain if the new £12,570 National Insurance threshold applies to self-employed people, as this was only mentioned as impacting the employed.
If you are unsure how these changes will impact your business, click through to find out more about how accountants in Ipswich can help you.
Fuel duty
For those who run vehicles as part of their business, the 5p per litre fuel duty cut will offer some relief against the rising cost of fuel. It is the biggest cut in fuel tax in history, but will only save an average of £3.30 per tank of fuel.
Those businesses that operate a fleet of vehicles will still be feeling the strain of rising costs. Perhaps considering outsourcing their fleet might save money in the long run.
Employment tax
Small businesses are allowed to reduce their National Insurance contributions each year under Employment Allowance Relief. In the Spring 2022 budget, this was increased from £4,000 to £5,000, giving tax cuts to 500,000 small businesses.
Business rates
The retail, leisure and hospitality sectors were told that there will be a 50% cut in business rates, which came into effect on April 1st 2022. This cut is capped at £110,000 per business.
In the Budget, the chancellor also mentioned that business rates would be re-evaluated in 2023 and would be based on rental values from 2021. This will hopefully see many companies in these sectors get a reduction in their bills which is greatly needed.
Reaction
Although many companies, especially small businesses welcomed the cuts, many were hoping that the Chancellor would go further. Some had hoped that the 12.5% VAT rate for hospitality businesses would remain – but unfortunately it returned to 20% in April 2022. There was however fresh hope on business rates as Retail, hospitality and leisure relief replaced the retail discount on 1 April 2022. Eligible business can now receive 50%off your business rates bills for the 2022 to 2023 tax year (1 April 2022 to 31 March 2023) – up to a total value of £110,000 per business.
Conclusion
Although much has been done to try and help businesses continue after a difficult couple of years, there were some that hoped more would be done to prevent companies from closing and jobs being lost. It remains to be seen what measures will be applied in the next Budget statement and if businesses will get the help they need in a challenging climate with costs rising fast.
