On Friday the 23rd of September, the new Chancellor, Kwasi Kwarteng announced a Mini Budget 2022 to help with the cost of living crisis, superseding the Spring Budget announced in March 2022.

Many of the tax cuts announced reversed taxes brought in by Rishi Sunak, the previous Chancellor, designed to help UK pay for the vast amount of borrowing over Covid.

The key tax cuts impacting small business owners are:

• For businesses, there will be a 6 month scheme “the Energy Bill Relief Scheme” to protect businesses, charities and public sector organisations by providing discounts on wholesale gas and electric prices (to be re-reviewed in March 2023)
• Corporation Tax rates were set to increase from April 2023 – up to 25% for some businesses, this will no longer go ahead as Corporation Tax remains fixed at 19%
• The previous Government had increased employers’ and employers’ national insurance contributions by 1.25%. This has now been reversed effective from 6 November 2022. Employees’ NIC will revert to 12%, and Employers’ NIC will revert to 13.8%.
• From the 6 April 2023, the basic rate of income tax will decrease to 19%.
• The additional tax rate of 45% and additional dividend tax rate of 38.1% will be abolished from 6 April 2023
• Tax on dividends will decrease back to 7.5% and 32.5% for higher earners, from 6 April 2023

The other key change for business owners is around IR35.

• The previous Government’s IR35 reviews in 2017 and 2021 had made it much harder for contractors to offer their services via their own limited companies.
• This resulted in many directors closing their companies and going into employment and made it very difficult to attract overseas contractors who were being forced into tax inefficient Inside IR35 roles.
• From 6 April 2023 these rules will be reversed, meaning contractors will be responsible for determining their own employment status.

What are your thoughts on the Mini Budget? Do you agree with the tax cuts particularly for the higher rate earners?

If you are a business owner running a limited company, the timing of when you take your dividends is very relevant as any dividends declared in the 22.23 tax year, will be subjected to the increased tax rates – 8.75% and 33.75% for higher dividends.

It’s never been a more important time to know your numbers and have a good chartered accountant who can help you save money on tax. If you’d like to find out more about our services, please get in touch via our contact us page.