On 23rd September, Chancellor Kwasi Kwarteng delivered his mini-budget, announcing comprehensive changes to tax in a bid to boost economic growth.
Ultimately, the changes are designed to improve the ability of British companies to raise money, attract talent, and grow and succeed.
With increased incentives to invest introduced in one go, as well as a number of tax breaks – what are the changes and how do these directly affect business owners and investment?
Increase in SEIS (Seed Enterprise Investment Scheme) Investment
The scheme offers tax efficient benefits to investors in return for investment in small and early-stage start-ups.
Companies are now able to raise a maximum of £250,000, up from £150,000. The amount investors can claim income tax relief has been doubled to £200,000 to support these changes.
The requirements for companies to qualify for investment has changed with the maximum gross asset limit increased to £350,000, from £200,000, and the age limit increased from two to three years.
Corporation tax is to remain at 19%, reversing the previously announced increase to 25% in April 2023.
The government is working with the devolved administrations and local partners to introduce Investment Zones across the UK. Amongst plans for zones to benefit from accelerated housing development and wider support for local growth, businesses can look forward to 100% relief from business rates on newly occupied business premises, and certain existing businesses where they expand in English Investment Zone tax sites.
Businesses in these zones can also benefit from Enhanced Capital Allowance – 100% first year allowance for companies’ qualifying expenditure on plant and machinery assets for use in tax sites, as well as Enhanced Structures and Buildings Allowance – accelerated relief to allow businesses to reduce their taxable profits by 20% of the cost of qualifying non-residential investment per year, relieving 100% of their cost of investment over five years.
Long-Term Investment for Technology & Science (LIFTS) & Pensions
Science and technology firms can look forward to billions of pounds of investment being unlocked in order to accelerate their growth.
Investment is being provided via the Long-Term Investment for Technology & Science (LIFTS) competition, which will provide up to £500 million to support new funds designed to catalyse investment from pensions schemes and other investors into the UK’s pioneering science and technology businesses. This will unlock billions of pounds of additional investment into UK scale-ups over time.
Draft regulations to reform the pensions regulatory charge cap are also being brought forward, giving defined contribution pension schemes the clarity and flexibility to invest in the UK’s most innovative businesses and productive assets creating opportunities to deliver higher returns for savers.
Cuts to National Insurance Contributions
Affecting employers and employees, the 1.25% increase in National Insurance Contributions which took effect in April is to be reversed from 6 November 2022. The government is also cancelling the introduction of the Health and Social Care Levy as a separate tax from April 2023.
Annual Investment Allowance
Further supporting business investment and growth, the government has made the £1 million level of the Annual Investment Allowance permanent, which was to expire on 31 March 2023. The aim is to support business investment, provide businesses with more stability and make tax simpler for any business investing between £200,000 and £1 million in plant and machinery.
IR35 reforms have been repealed, meaning that companies that use independent contractors are no longer responsible for paying the correct tax, with the responsibility placed back on the contractor. The aim is to free up time and money for these businesses.
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