What the spring statement means for small businesses

Ahead of the 2022 spring statement, there has been a great deal of talk around how the Treasury may intervene to help the British people through the personal cost-of-living crisis that has engulfed the economy. However, we must also ask whether the statement does, or does not, address the problems facing the business community?

The reality is that the statement is something of a mixed bag for businesses. As expected, the bulk of measures announced today are squarely 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 substantial packages of support for the business community, akin to the Covid-19 support schemes announced back in 2020, will be disappointed. However, there are a couple of notable and unexpected announcements that will benefit the small business community.

Employment allowance

This is the key area in which small businesses will benefit from the measures announced in the spring statement. 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, effectively saving small businesses £1,000 per year in National Insurance contributions.

National Insurance increase

With the employment allowance increasing, what about National Insurance itself? Perhaps the most significant of the changes taking effect this spring is the 1.25 percentage point increase in National Insurance contributions (NICs) made by both employers and employees that was announced back in September 2021.

Despite calls from both sides of the Commons to delay or scrap the NIC increase, the government is going ahead and NICs will increase by 1.25 percentage points from April 2022. This means that class 1 contributions (employees) will rise from 12% to 13.25% and class 1a and 1b contributions (employers) will rise from 13.8% to 15.05%.

The good news for workers (both employed and self-employed) is that the threshold at which they start paying National Insurance is rising from £9,880 to £12,570 from 6th July 2022, 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.

Read more about exactly what the National Insurance increase involves and how it may affect small businesses.

Rising commercial energy costs

The latest analysis from the Federation of Small Business (FSB) suggests that, without government intervention, small enterprises could face an increase of £10,000 on their gas and electricity bills.

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.

Read more about the ways in which small businesses will be impacted by the rising cost of commercial energy, as well as some tips for how to mitigate the rise.

Fuel duty

In today’s statement, a reduction in fuel duty by 5p per litre was announced. This cut, which the Chancellor proudly mentioned is the largest all fuel tax cut ever, 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.

Conclusions

So there you have it, the ways in which today's spring statement by Chancellor Rishi Sunak will affect small businesses up and down the country. 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 above which employees start paying National Insurance to £12,570 from 6th July 2022

As welcome as many of these measure will be, the desire of the business community for more targeted support in the face of rising costs, continues to go unfulfilled.