What does the mini-Budget U-turn mean for small businesses?

Following the mini-Budget on 23rd September, an unprecedented U-turn on some of the measures that were first announced was confirmed yesterday by new Chancellor Jeremy Hunt. Here’s a breakdown of how the mini-Budget’s original measures for small businesses have been affected by yesterday’s announcement.

The measures that have been cancelled or changed

Support for energy bills

The Energy Bill Relief Scheme for businesses and the Energy Price Guarantee for households were both announced last month prior to the mini-Budget. 

The Energy Bill Relief Scheme is designed to support all business owners in England, Scotland and Wales with the rising cost of energy by applying automatic discounts to their energy usage. An equivalent scheme for businesses in Northern Ireland is also in place.

Although the Energy Bill Relief Scheme was initially introduced for two years, it was announced yesterday that it will only run for six months. This means that the automatic discounts applied to the energy usage of all businesses in the UK will only be in effect between 1st October 2022 and 31st March 2023.

A Treasury-led review will assess the support that could be offered to businesses and households after both the Energy Bill Relief Scheme and Energy Price Guarantee end in April 2023. 

Cut to the basic rate of Income Tax 

Instead of reducing the basic rate of Income Tax in England and Northern Ireland to 19% as announced in the mini-Budget, it was confirmed yesterday that this rate will remain at 20% indefinitely. In Scotland, the Scottish rate of Income Tax will continue to apply, while the Welsh Income Tax rates will continue to apply in Wales.

Reversal of tax rate increase on dividends

In April 2022 the rate of Income Tax charged on dividend income was increased by 1.25%, and the mini-Budget had originally laid out plans to reverse this increase in April 2023. This reversal has now been cancelled, which means that the rates of Income Tax charged on dividend income will remain 1.25% higher until further notice.

IR35 reforms

The mini-Budget had laid out plans to repeal the 2017 and 2021 reforms to IR35 legislation. However, it was confirmed yesterday that this change will not go ahead and the current rules for off-payroll working will remain in place. 

The measures that have stayed in place

National Insurance rate increase reversal

The Chancellor confirmed yesterday that the National Insurance rate increase reversal first announced in the mini-Budget will go ahead as planned.

Annual Investment Allowance level set at £1m permanently 

The limit for the Annual Investment Allowance - which had been set permanently at £1m in the mini-Budget - will remain unchanged. 

You can find out more about the changes announced yesterday on the government’s website.

Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.

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