The Federation of Small Businesses, the British Chambers of Commerce and the Institute of Directors have welcomed the pro-business measures announced today by the chancellor of the exchequer.
Chancellor Kwasi Kwarteng has announced a plan for growth in today’s mini Budget, with an ambition to reach a 2.5% rate of growth. The measures include:
- The planned corporation tax rise has been cancelled, with the rate staying at 19%;
- The basic rate of income tax will be cut to 19% in April 2023 - one year earlier than planned;
- The additional higher rate of tax will be abolished from April 2023. In its place will be a single higher rate of income tax of 40%;
- IR35 reforms are to be scrapped from April 2023;
- The recent 1.25 percentage point rise in National Insurance Contributions is to be reversed, a change which will save 920,000 businesses almost £10,000 on average next year.
The chancellor has also announced significant cuts to Stamp Duty Land Tax. The nil rate band will be doubled from today from £125,000 to £250,000, meaning that 200,000 more people every year will be able to buy a home without paying any Stamp Duty at all. In addition, first time buyers will now pay no stamp duty up to £425,000.
Commenting on his growth plan, chancellor Kwasi Kwarteng said: “This will not happen overnight but the tax cuts and reforms I’ve announced today - the biggest package in generations - send a clear signal that growth is our priority.
“Cuts to stamp duty will get the housing market moving and support first-time buyers to put down roots. New Investment Zones will bring business investment and release land for new homes in communities across the country. And we’re accelerating new road, rail and energy projects by removing restrictions that have slowed down progress for too long.”
The chancellor has also made the temporary increase of the Annual Investment Allowance to £1 million permanent, rather than letting it return to £200,000 in March 2023. This gives 100% tax relief to businesses on their plant and machinery investments up to the higher £1 million limit.
Reaction to the mini Budget
Martin McTague, national chair of the Federation of Small Businesses (FSB), said: “The Truss government is off to a flying start. The chancellor has delivered pro-small business measures today and has rightly recognised that removing taxes on jobs, investment and entrepreneurs is essential for our economy.
“Ministers need to be relentless in removing barriers to small business success - especially with the current headwinds. The government has today signalled its determination to back small firms and we look forward to working with ministers and departments to put in place measures to help small businesses grow and succeed.”
Shevaun Havilland, director general of the British Chambers of Commerce (BCC), said: “Businesses across the UK will enthusiastically welcome the chancellor’s pledge to focus on economic growth and speed up a new infrastructure development … this is a bold start, and the chancellor must now use this as a springboard to develop a comprehensive long-term economic strategy.”
Kitty Ussher, chief economist at the Institute of Directors (IoD), said: “This is a good news day for British business. In a time of low confidence and economic uncertainty, the new chancellor’s emphasis on going for growth will be very welcome to firms of all sizes across the UK. Taken together with the energy bills relief scheme, the package as a whole will make it easier for businesses navigating a challenging economic environment in the coming months.
“The reversal of the hike in employers’ national insurance, which we have campaigned for from the outset, is of particular relief, as is the cancellation of the forthcoming corporation tax increase. We also welcome the decision to simplify IR35 rules, keep the Annual Investment Allowance at £1m, extend the Enterprise Investment Scheme beyond its sunset clause and streamline the planning process for infrastructure projects.”
However, she added: “We are concerned that the chancellor had not asked the OBR to undertake its usual independent assessment of the impact of its proposals on government debt and the wider macro economy. Without this, neither businesses nor parliament have the reassurance that the scale of this intervention is affordable and so does not jeopardise overall economic stability.”
Written by Rachel Miller.
Photo: UK Government on Flickr.