In March 2022, Chancellor Rishi Sunak announced in his spring statement (2022) that he would be backing small businesses to thrive and grow.
Sunak stressed the importance of SMEs to the UK economy. On his visit to Ipswich in May 2022, the chancellor stated: “Small businesses are the heart of our economy – creating jobs and prosperity across the UK.” as well as that he “wants them [SMEs] to know we will always stand behind them”.
These support schemes will positively affect and create opportunities to regain lost ground post-pandemic for many businesses. After a survey revealed that more than 50% of SMEs rely on credit to pay for insurance, with 9% of SMEs also borrowing £3,000 to purchase cover, the government is seriously considering how to support SMEs.
Here are five ways the government has planned to support SMEs, all varying from schemes to tax cuts in the hope that companies feel confident enough to start investing in the UK economy, as well as creating an influx of job opportunities to spread prosperity.
The government’s plans are the following:
- Cutting employment taxes for small businesses.
Firstly, the government is tackling employment taxes for SMEs. Employment Allowance is a tax relief which allows eligible businesses to reduce their National Insurance Contributions (NICs) bills each year. Last month the government increased the Employment Allowance from £4,000 to £5,000.
The new tax cut is worth up to £1,000 for nearly half a million SMEs (30% of all businesses). This includes around 50,000 companies which will be taken out of paying NICs and the Health and Social Care Levy entirely.
- Help grow schemes.
The government is also rolling out their landmark Help to Grow schemes. Help to Grow: Digital is a UK-wide government-backed scheme that aims to help businesses choose, buy and adopt digital technologies that will help SMEs grow their business.
Eligible companies can receive a 50% discount on buying new software worth up to £5,000 per SME alongside free impartial advice and guidance about what digital technology is best suited to boost your business performance.
Our Help to Grow: Management scheme provides small businesses with access to world-class business expertise on everything from leadership and financial management to marketing and digital adoption- and is 90% funded by the Government.
- Cutting Business rate reliefs.
With many SMEs impacted by the increase in inflation, the government has planned to cut business rates for the 2022/23 tax year. From April this year (2022), small retail, hospitality, and leisure businesses can benefit from 50% off their business rate bills. According to the government, this is the most significant single-year cut to business rates in the past 30 years.
Additionally, from April 2022, there will be no business rates due on a range of green tech, including solar panels and batteries, whilst eligible heat networks will also receive 100% relief. These reliefs will save businesses around £200 million over the next five years.
- Super-deduction and annual investment.
The chancellor stated that he wants businesses to help drive economic growth by investing. They have created two policies that will help SMEs invest in the economy: One is called the super deduction, and the other is the annual investment allowance.
To spur business investment, the super-deduction, the most significant two-year business tax cut in modern British history, allows companies to cut their tax bill by 25p for every £1 they invest in any qualifying machinery and equipment. This can include purchasing computers, most commercial vehicles and office furniture.
On top of this, the government have extended the temporary £1 million limit for the Annual Investment Allowance to the end of March 2023.
- Fuel duty.
Lastly, the government is supporting SMEs by cutting the price of fuel. Due to the unique circumstances globally, including the war in Ukraine. This cut will benefit anyone across the UK, saving consumers around £2.4 billion over the next year.
The government have cut fuel duty on petrol and diesel by 5p per litre for 12 months – which became effective on 23 March 2022. This is the most significant cut, in cash terms, that has ever been applied across all fuel duty rates at once. This cut, plus the freeze in fuel duty in 2022-23, represents a £5 billion saving.
If you require further support, please do not hesitate to contact your tax advisor (01942816512) to discuss available support that you may benefit from.