Mini-Budget: Cash Is King

At the beginning of the week, we welcomed new King Charles III. At the end of the week we're asked to welcome another King. Cash in people's and businesses' hands is clearly the new King!

All the main taxes, apart from VAT, have been included. What will this mean for small businesses?

Consider trading from an Investment Zone

Savings include no stamp duty on commercial property purchases, no business rates and no employer's NI for new employees on salaries up to £50,270. 

Investing in plant & equipment is permanently tax efficient

Up to £1m annual spend will receive 100% tax relief permanently. Over the last several years this has been up and down. A simple permanent approach helps businesses plan over the long term. It seems the super-deduction of 130% remains until 31 March 2023, so if investment plans can be brought forward more tax will be saved for purchases before 31 March 2023.

Consider raising money from external investors

With the certainty of SEIS and EIS continuing and thresholds being increased, more investors may be attracted to invest in new growing businesses. Businesses may find this source easier to access going forward. Employees can also be rewarded through share value growth by increased thresholds for the approved CSOP share option plan. 

Taking on employees should be more affordable

The reversal of national insurance back down to 13.8% without taking away the increased £5k employer annual allowance helps make employment more affordable. 

Using temporary limited company freelancers and consultants should be easier

If your business doesn't require a permanent employee, you may need a freelancer or consultant. The abolition of off-payroll working frees up businesses from spending time on considering whether each supplier company could be deemed to be an employee. The flip side is that the freelancer and consultant need to take their own view as to whether they're self employed or not, and have the debate with HMRC away from the businesses they work with.

Business owners rewards are increased

Successful company owners will benefit from the highest dividend rate of 32.5% from 6 April 2023. The simple advice must be keep dividends low before 5 April 2023 because this tax year is subject to the highest dividend tax rate of 39.35%. Within the basic rate income tax band to £50,270, this year's dividend rate is 8.75% which will reduce back down to 7.5% from 6 April 2023.

Sole traders and partners will benefit from the income tax rate reduction to 19% on total income up to £50,270 from 6 April 2023 and the Class 4 national insurance rate reduction back down to 9% from November, creating a blended reduced Class 4 rate across this tax year.

The effective tax rate is still very high on income between £100k and £125k where the personal allowance gets withdrawn. It's remains important to keep out of this zone if possible usually through taking fewer dividends or making pension contributions. 

Construction businesses and related trades expansion 

The reduction in stamp duty on residential properties seems like an incentive to build more homes across the country. This not only benefits construction companies but any business supplying them.

The plan is these measures leave more cash in business' and their owners' hands to help the business grow. Let's hope the economy ends up being King too.