A Warwickshire tax specialist says the increased employment allowance will offer minor relief for small businesses but for many the financial benefit will be wiped out by the National Insurance increase.
Anne Rose, Head of Tax at Burgis & Bullock, says while there were promises for the future in Rishi Sunak’s Sprint Statement, businesses needed more immediate support to tackle rising costs.
Burgis & Bullock has offices in in Leamington, Nuneaton, Rugby and Stratford-upon-Avon.
Sunak announced that the employment allowance for small businesses would be increased to £5,000 – however the 1.25 percentage point rise in national insurance contributions from April will remain.
There are also changes for research and development tax credits and further tax cuts for business investment expected in the in the autumn budget and were flagged up by Sunak.
The threshold for national insurance will be raised by £3,000, however, Anne Rose says this will be a personal tax cut and not see a reduction for businesses.
“It’s all well and good to help businesses with capital investment, but ultimately for a small business owner, if you are struggling day-to-day, come the autumn you still might not have the money to invest regardless of tax breaks,” said Anne.
“Every business is facing increased costs with supply chain, demands for higher wages to match inflation and a short supply of skilled workers. Businesses I speak to would have hoped for more immediate help in the Spring Statement, but that hasn’t come.
“Businesses had called for the 1.25 percentage point rise for national insurance to be postponed or cancelled, that hasn’t been the case and it will bring a massive cost for companies that have a lot of staff.
“The employment allowance will be a help to small businesses, but it’s certainly not a game-changer, and of course if the business is over a certain size it won’t even be eligible for that allowance.
“It’s a case of giving with one hand and taking away with the other.
“Unfortunately, we have to accept that there is a limit to what the Government can do to support businesses financially. A precedent was set over Covid with investment to keep businesses afloat, but that was in extraordinary circumstances, and there isn’t a bottomless pot of money.
“We will be interested to see what the Government plans are for research and development tax credits in the autumn. I think they will try to make it more targeted, be more aggressive in their claim investigations and ultimately see less successful applications.
“However, this could potentially make the scheme more generous for companies with genuine and worthwhile claims.
“There will be a knock-on effect for businesses from the reduction in fuel duty, but again, that’s not a game-changer. Businesses will have wanted more support now, not promised for the future, and it would be a surprise if the Spring Statement led to any increase in business confidence both here in Warwickshire or nationally.”