Many small businesses are facing increased materials costs and higher operational expenses as well as struggling with supply chain challenges, materials availability, difficulties with recruitment, and uncertainty due to events in Ukraine. 
The hoped-for tax cuts and energy grants weren’t included, so how will small businesses benefit? 
National Insurance changes 
The threshold for employees paying Class 1 National Insurance contributions (NICs) will increase from £9,880 to £12,570 in July 2022. This will mean that people earning less than around £34,000 during the 2022/23 tax year will pay less NI than they did last year. People earning more than £50,000 will pay more. 
The threshold for Class 4 National Insurance contributions paid by self-employed people on their profits will also increase from July 2022. Currently £9,880, the threshold will increase in July to £12,570. 
The change will reduce the impact for employees of the 1.25% increase in NI announced last September but won’t affect their employer’s contribution. In fact, the NI increase of 1.25% is actually 2.5% for employed business owner/managers paying PAYE because they will be responsible for both employer and employee contributions. 
For sole traders the Small Profits Threshold has risen from £6,515 to £6,725 and the Lower Profits Limit has risen from £9,569 to £9,880 and will increase again in July to £12,570. 
If annual profits are between the Small Profits Threshold and the Lower Profits Limit you can still claim a qualifying year for contributions towards your State Pension and other benefits, without paying Class 2 National Insurance. 
R&D Tax Credits 
In the spring last year, the government said it would review R&D tax credits and add data purchases and cloud computing with an added focus on innovation. We are still waiting for news on longer-term reforms to the system, hoped for in the autumn, but there’s little to immediately help extra investment or build confidence. 
Capital Allowances 
The Annual Investment Allowance will remain at £1million until March 2023. The Chancellor indicated that more news on capital allowances can be expected in the Autumn Budget. 
Fuel duty 
Cutting fuel duty by 5p per litre is the largest reduction made to date and will last for 12 months. According to RAC Fuel Watch this will reduce the cost of filling up an average tank, which has risen to £98.43 for diesel and £91.87 for petrol, by around £3.30. However, since oil and gas prices are still very unpredictable, the price we pay at the pumps will continue to change regularly. 
Income tax 
The UK’s basic rate of income tax will be cut from 20% to 19% but not until 2024. It’s expected to apply to more than 30million people. 
Employment allowance 
Employment allowance relief, which allows small businesses to reduce their national insurance contributions each year, will be increased from £4,000 to £5,000. This will amount to a tax cut of up to £1,000 for half a million small businesses. 
Business rates 
The 50% business rates discount for the retail, leisure and hospitality sectors was confirmed with a cap of £110,000 per company. 
The long-awaited business rates re-evaluation is due to take place in 2023, based on 2021 rental values. This should result in lower bills for many businesses. 
Overall impact 
There are some immediate benefits for small business owners thanks to the changes to employment allowance, fuel duty and NI thresholds. 
However, 12.5% VAT for hospitality businesses hasn’t continued and small and medium-sized businesses that had hoped to be taken out of the business rates system will be disappointed. 
If you would like to discuss how these changes will affect your small business or steps you can take to manage your costs and improve your profits please get in touch. 
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