Now that the dust has settled, let’s take a look at the relevant parts of the budget for small businesses.
National Insurance
The National Insurance increase of 1.25% on both employee and employer’s contributions has been reversed effective from April 2023.
Dividend Tax
The Dividend tax increase of 1.25% has also been reversed, the new rate will be back to 7.5%.
Corporation Tax Increase Cancelled
The Corporation Tax rate will now remain at 19% for the foreseeable future.
Income Tax Cut
The Income tax will be slashed from 20% to 19% effective from April 2023
Stamp Duty
The threshold to which stamp duty isn’t paid (the nil-rate threshold) will increase to £250,000, from £125,000. The threshold at which first-time buyers begin to pay stamp duty will increase from £300,000 to £425,000 and the maximum value of a property on which first-time buyers’ relief can be claimed will increase from £500,000 to £625,000. Stamp duty land tax only applies in England and Northern Ireland.
Capital Allowances
The AIA will remain at £1 million for the foreseeable future, the proposed change to reduce this to £250,000 has now been cancelled.
IR35 rolled back
The recent IR35 changes have been repealed, the rules on off-payroll working will now revert to the status quo of a few years ago, with large companies no longer being responsible for carrying out IR35 assessments.
Overall, a quite beneficial result from this budget for small businesses around the UK.
The Chancellor also said that that the additional rate of income tax would be abolished from April 2023. Currently the additional rate of 45% is charged on taxable income over £150,000. On 3 October 2022, the Government said that it will not be going ahead with this measure. The additional rate will remain at 45% in April 2023. Announcing the decision not to go ahead with the tax cut, the Chancellor said that “it is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our economy.”