The Daily Observer London Desk: Reporter- Kathryn Williams
It was dubbed the ‘growth’ Budget – but many small businesses have been left in the cold, with little further support in the face of crippling energy costs and higher taxes.
Chancellor Jeremy Hunt confirmed the long-awaited corporation tax rise from 19 per cent to 25 per cent. Although many smaller firms will be exempt, it will leave some with higher costs and could act as a barrier to investment.
And as the ‘super deduction’ scheme winds down at the end of the month, Hunt offered a new system of ‘full expensing’ in its place.
We take stock of what the Budget means for small businesses, explain the rules around the new rate of corporation tax, and look at what full expensing is and whether it will offset higher costs elsewhere.
Corporation tax is set to rise to 25% next month, leaving some small businesses with even higher costs
Corporation tax now 25% – but some are exempt
Even before rising energy costs and supply chain issues, small businesses are facing huge headwinds come April.
Then-Chancellor, Rishi Sunak had introduced a hike from 19 per cent to 25 per cent in March 2021, but it is only now coming into force after a series of ups and downs.
Kwasi Kwarteng blocked the rise as part of October’s disastrous mini-Budget, before Hunt confirmed the Government’s commitment to a 25 per cent corporation tax as planned.
From 1 April the main corporation tax rate will rise from 19 per cent to 25 per cent for companies with profits above £250,000, while small companies with profits of £50,000 or less will continue paying 19 per cent.
A marginal relief rate will provide a taper for companies with profits between £50,000 – the lower limit – and the higher limit of £250,000.
HMRC has put together a calculator for marginal relief, which will help you work out how much more you’ll be paying.
The lower and upper limits will be reduced for short accounting periods and when there are associated companies.
If you operate more than one limited company, where one company is controlled by the other, the thresholds are also reduced.
While the vast majority of businesses will be unaffected by the change – 70 per cent of companies will still be paying the 19 per cent rate, according to the Treasury – there are concerns higher taxes will further disincentivise investment.
