|23rd September 2022 saw the “mini-budget” and the first opportunity for the new PM and Chancellor to stamp their mark on the UK. And boy they went for it, with the announced £45 billion of tax cuts. The biggest tax-cutting budget since Barber’s “dash for growth” in 1972. Spoiler alert, that didn’t end well.
The budget hasn’t gone down well with markets, tory backbenchers and those of us that would like a more fair approach to taxation. But rather than focus on slinging mud, what does this mean for you right now as a small business owner and what do you need to do?
Check your inbox for news from your energy supplier on what your discounted price will be and calculate what that means for your cashflow.
Consider switching to a fixed contract if you are on a variable one.
- The Energy Bill Relief Scheme was announced pre-budget. It should mean lower prices than anticipated for six months 1 October 22 to 31 March 23 through the use of a “Supported Wholesale Price”. This is expected to be less than half the wholesale prices anticipated this winter.
- Applies to fixed contracts agreed on or after 1 April 2022 and will be automatically applied to bills (expected in November bills onwards)
- For variable, deemed and all other contracts there will be a ‘maximum discount’ applied. It is likely this would mean less savings therefore suppliers are meant to be giving customers the opportunity to switch to a fixed contract/tariff for the duration of the scheme
Hold off on dividends till post 6 November.
- One of the headlines was the reverse of the 1.25% national insurance increase brought in by Rishi Sunak. This means employee and employer national insurance will fall from 6 November.
- This also means that the dividend tax reduces back to 7.5% (basic); 32.5% (higher) and 38.1% (additional).
- Therefore if you are paying yourself using dividends you should consider postponing these to November and using your director loan in the meantime. Check-in with your accountant on whether this is possible for you.
- The additional tax rate is being scrapped from April 23, both for dividends (all UK) and income tax (not Scotland). If you are earning over £150k and taking dividends definitely speak with your accountant about what is the best approach for you this tax year and next.
Check that your payroll software will be updated in time for the changes to National Insurance in November.
- Payroll companies must love this government. They have had to update their systems for the national insurance rise, then the national insurance thresholds changed and now the rise has been reversed with short notice and the planned levy next year cancelled.
- If you are using a cloud based payroll provider they should be confirming that they will be updated in time. In addition, the Government have confirmed the HMRC Basic PAYE tools will be updated in time. If you have a desktop payroll system, you will need to get an update installed.
Other points of note for the mini budget
- The income tax rate changes from April 23 do not apply to Scotland. It will be interesting to see what the Scottish Government does in this respect. I suspect the additional tax rate (currently 46% in Scotland) will not be scrapped. However, as Scotland has a more complicated “lower” rate structure with a 19% starter rate, 20% basic and 21% intermediate rate, I wonder whether there will be pressure to amend this.
- Self Employed – there will be a blended Class 4 NICs rate of 9.73% for profits over £11,909 and 2.73% for profits over £50,270 for the 22/23 tax year. This blended rate is designed to ensure consistency and fairness with Class 1 NICs payers who have paid the increased NICs rate since April 2022.
- If you are a contractor or use contractors, the IR35 reforms are being reversed as well. This basically means that the responsibility of determining whether you are a contractor or should be an employee is now back on the contractor. It is likely then that more contracting work will come up as a lot of organisations took a very risk adverse approach and stopped using contractors or made people go on to payroll for one day’s work (hi Universities!!)
- The expected cut in VAT rate did not happen and there was no news on business rates (the 50% temporary discount this year not extended in this budget). Another full budget is expected in the Autumn so maybe we will hear more then.
Finally, on a purely selfish front, the best news I took from the budget was the cancellation of the planned increase to Corporation Tax in April 23 (19% up to 25% depending on profits). So all businesses will be taxed at 19% under Corporation Tax.
If you have questions about how the Mini Budget impacts you get in touch by filling out the form on our get started page.