What Does the Spring Budget Mean for You and Your Business?

On Wednesday 23rd of March 2022 the chancellor of the Exchequer, Rishi Sunak unveiled his Spring statement for the budget. A lot was covered during his statement, so we have extracted the key findings and summarised for you below. 

Sunak opened his statement by addressing the conflict in Ukraine and advising “The actions we have taken to sanction Putin’s regime are not cost-free for us at home. The invasion of Ukraine presents a risk to our recovery as it does to countries around the world.” However overall, in his statement there wasn’t too much that differed from what was announced in the Autumn Budget back in October last year."

To set the scene, independent think tank the Resolution Foundation has suggested the average household income could drop by £1000 a year. Many are already aware that prices rose at their fastest rate for 30 years during the 12 months up to February, as soaring fuel, energy and food costs contributed to a 6.2% increase in living costs.  

Three big figures to come out of the statement were –

• Inflation forecast to average 7.4% this year

• UK growth expectation downgraded to 3.8% this year

• UK to spend £83bn on debt interest in the next year

So how does impact business? Well pretty significantly there will be no help with the soaring energy costs unlike households who now have a VAT rate of 0% for purchasing/installing solar panels, heat pumps or insulation. Additionally, the Household Support Fund will double to £1 billion, with £500 million going to local authorities to distribute from April. Money will be given to vulnerable households in the form of small grants that can be used to meet daily needs such as food, clothing, and utilities. This does mean businesses will be hit hard on energy costs as companies aren’t protected by a price cap. 

Sunak did announce changes to research and development tax credits, saying the generosity of reliefs for business investment would be increased to boost UK productivity. The Research and Development tax credit scheme will be reformed to include data, cloud computing and pure mathematics projects. This is a type of Corporation Tax relief for businesses that work on innovative projects in science and technology. Business investment tax rates will be cut from autumn and the annual investment allowance, which means you can deduct the full value of any qualifying item from your profits before tax, will be increased to £1 million. The chancellor also said he would increase the employment allowance for small businesses to £5,000 – a tax cut worth up to £1,000 for half a million small firms starting in two weeks’ time.

There will also be a planned business rates reduction scheme that will kick in from April. This means any business in the retail, hospitality and leisure industry will get a 50% cut in their business rates, up to £110,000. This could see hundreds of thousands of small businesses across the UK save thousands of pounds. For example, a typical pub will save around £5,000 a year.

The reduction in fuel duties on the other hand, will benefit households and businesses alike, the fuel duty on petrol and diesel (ie the tax charged to importers and producers of these fuels) was reduced by 5p per litre on 23 March 2022. This reduction in costs for fuel companies is intended to be passed on to consumers in the form of lower petrol prices at the pumps. The cut will last at least 1 year. This could help to reduce running costs for businesses that use lots of fuel. For instance, those who make lots of deliveries or whose workers must travel to multiple locations for work. But is this enough? Many are not sure -

The Federation of Small Businesses (FSB) in Scotland gave many of the measures a muted welcome but warned more may need to be done to help local firms absorb rising energy costs. Andrew McRae, the FSB’s policy chair, said: “The Chancellor’s measures today will buy Scotland’s small businesses an inch of breathing space and by reducing fuel duty, the UK Government is helping every small business reliant upon their vehicle for their livelihood, like the rural tour guide that drives a minibus or the plumber who transports their tools in their van. There was little however for smaller firms facing overwhelming increases in their energy bills. This was a glaring omission when these operators have none of the protections of households nor the negotiating power of big businesses. Taking action to increase the employment allowance, as FSB suggested, will help local and independent businesses absorb some of the increasing costs of sustaining jobs.”

David Nicklin, Managing Director at West Midlands-based Nicklin Transit Packaging, said “The measures outlined in today’s statement don’t address the complex challenges facing the manufacturing sector right now, where costs are increasing on multiple fronts. Inflationary pressure is affecting all businesses, but it presents an even greater problem for those in energy intensive industries like ours. While we have invested in the necessary measures to build a resilient business by shoring up our supply chain and sharpening our strategic approach, there must be a realisation among policy makers that specific and targeted support right now is essential if we are to ‘build back better’ from the pandemic.”

Ultimately, the benefits to businesses was lacking and whilst the reduction in fuel duties may be a big help to those in logistics, many will only feel the pinch of inflation more. As a consumer the spring update provided a slight sigh of relief with many expecting the cons to far outweigh the pro’s, although critics advise the government could certainly do more. The autumn budget announcement is expecting to comment on businesses and industry a lot more but until then many wait with bated breath and intrigue to see how inflation affects everyday life going forwards. 

If you are concerned about how the Spring Budget will affect your business, contact one of our team today and discuss the options that are available to you. You can call us on 0800 085 4150 or fill in our quick enquiry form.