What the Spring Statement means for small businesses.
The statement is a bit of a mixed bag for businesses. As predicted, the majority of measures are aimed at struggling households and workers who are trying to navigate one of the worst cost-of-living crises in recent memory.
Those hoping for packages of support for the business community will be disappointed. However, there are a couple of notable and unexpected announcements that will benefit the small business community.
Employment allowance
Currently, the employment allowance means that small businesses with a National Insurance liability of under £100,000 for the previous tax year, can reduce their liability by up to £4,000. This allowance is being increased to £5,000, saving small businesses £1,000 per year in National Insurance contributions.
National Insurance increase
Perhaps the most significant of the changes taking effect this spring is the 1.25% increase in National Insurance contributions (NICs) made by both employers and employees that was announced back in September 2021.
Despite calls to delay or scrap the NIC increase, the government is going ahead and both employers and employees will pay an additional 1.25% on their NICs from April 2022.
The good news for workers is that the threshold at which they start paying National Insurance is rising from £9,880 to £12,570, saving many workers £356 per year.
The bad news for small businesses is that this increase in the threshold only applies to employees, meaning employer contributions will continue to be paid on all salaries over the £9,880 threshold.
Rising commercial energy costs
There have been significant and sustained calls from major figures and bodies in the small business community for a rebate for firms to match the one announced for households. However, the government today did not announce any major new plans for government support to counter the huge rise in commercial energy prices.
It is possible that the Chancellor is aiming to primarily address the personal cost-of-living crisis in this spring statement and save plans for any government intervention in the business sector for the autumn budget. Whether many small enterprises will be able to survive until the autumn without financial assistance is a different question altogether.
Fuel duty
In today’s statement, a reduction in fuel duty by 5p per litre was announced. It’s the largest fuel tax cut ever and is primarily aimed at individuals and households feeling the pinch of rising fuel costs.
Because the fuel duty cut applies to all petrol sales. It will have a positive impact on small businesses that use road vehicles, from minicab firms to couriers and hauliers. The RAC estimates that the cut will knock £3 off the cost of filling up a regular car fuel tank.
Summary
The majority of the announcements concern individuals and households, with some of the headline measures including:
Fuel duty cut by 5p per litre
A 0% VAT rate for households purchasing energy saving materials, such as solar panels or heat pumps
Doubling of the household Support Fund from £500 million to £1 billion
Raising the threshold at which employers start paying National Insurance to £12,570
As welcome as many of these measure will be, the business community will feel that these plans don't go far enough to support them.
