Wylie & Bisset highlights mini-Budget measures which work for SME’s

04/10/2022
Wylie & Bisset tax partner Catherine McManus

WYLIE & Bisset, Accountants and Business Advisers say that some mini-Budget measures for businesses have been obscured by Chancellor Kwasi Kwarteng’s plan and subsequent U-turn on the proposed removal of the 45p income tax rate, paid by those earning more than £150,000 a year in England and Wales.

While First Minister Nicola Sturgeon made it clear last week that Scotland had no intention of following the Chancellor’s intended income tax proposals for Scotland’s highest earners, Wylie & Bisset tax partner Catherine McManus suggests that some company tax changes within the mini-Budget passed largely unnoticed.

“Beyond the proposed income tax and NIC provisions, there are elements of the mini-Budget that are beneficial to SMEs of a certain size,” she said.

“For example, the proposed increase in the corporation tax rate has been scrapped, it stays at 19 per cent, while the expansion of some share options schemes might encourage more employers to offer up shares to employees.

“The Chancellor also ditched the intended reduction in the annual investment allowance (AIA) limit from £1million to £200,000 planned for next April by setting the AIA limit permanently at £1 million.”

While welcoming these changes, Ms McManus notes that, just as the abandoned removal of the 45p income tax rate had focus on the very wealthy rather than those struggling to pay bills, the same might be said about the company tax changes.

“The company tax changes will help medium to larger sized businesses, but for micro-entities, changes in the corporation tax rate are unlikely to make much difference, especially to those companies which are loss making.

“Further, smaller companies are less likely to invest £1m on capital assets to access capital allowances so, once again, that change in the mini-Budget is unlikely to be of much assistance.”

Ms McManus suggests that the mini-budget was targeted at entities and individuals of a certain size and wealth, in the hope that some of the measures will encourage investment which, by default, will help microbusinesses and the wider economy.

“However, we can see from the U-turn on the 45p tax rate and the turmoil in the markets over the last week that the Chancellor missed the mark with his big-ticket announcement on income tax.

“Consequently, we wait further announcements next month in the full Budget review with interest, to ascertain what the longer-term impact will be,” she said.

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