On 23 September 2022, Finance Secretary Kwasi Kwarten announced the 2022 Growth Plan. The plan outlines changes to the tax system and business support schemes. The changes are aimed at boosting the UK economy in light of the looming recession.
This post explains what the changes are and how they affect your business.
This is a small budget as we have a “full budget” later this year.
Corporate tax rate: Proposed tax rate hike canceled
A proposed increase in the corporate tax rate to 25% has been scrapped by the government. The tax rate remains at 19%, ensuring businesses don’t pay more tax on trading profits and cash remains in the business.
In 2021, the government announced a new corporate tax rate increase intended to come into effect on 1 April 2023. The proposed tax rate hike would hit profitable businesses the hardest and make tax rate calculations more complicated.
Before:
- Companies making profits up to £50,000 continue to pay a 19% corporate tax.
- Businesses making profits over £250,000 will have to pay the new main tax rate, which has been increased to 25%.
- Companies making profits between £50,000 and £250,000 had to pay a 25% tax rate (although they could claim a ‘marginal tax rate concession’ where the tax rate would be reduced from 19% to 25%). increase).
You can also reduce your corporate tax burden by applying for a reduction or exemption from the R&D tax.
The amount of increase in national insurance is reversed
On April 6, 2022, the National Insurance (NI) rate was increased by 1.25%. The government has announced that this he will be “cancelled” on November 6, 2022.
During April:
- Employer NI increased from 13.8% to 15.05%
- Employee NI increased from 12% to 13.25%
This increase was introduced as a way to fund health and social services levies that sought to help the NHS after the pandemic. This is currently funded by government borrowing.
A portion of the National Insurance contributions can be included as part of the labor costs in the R&D tax relief claim.
dividend Tax rate increases for company directors have been abolished
The dividend rate hike has been abolished. That means directors of companies that pay themselves through dividends get richer.
In April of this year, the dividend rate for self-employed directors increased by 1.25% to 8.75% for basic rate income taxpayers and 33.75% for high rate income taxpayers.
New Investment Zones: Where Are They?
The Prime Minister announced that about 40 low-tax, low-regulation investment zones will be introduced.
These zones look like this:
- Greater Manchester
- west midlands
- Thames Estuary
- Tees Valley
- west yorkshire
- Norfolk
Similar to the tax cuts for businesses within these zones, there will also be personal tax cuts for employees living or working there (details to be announced in the ‘full’ budget later this year). Planning regulations for companies entering these regions will also be relaxed.
SEIS increases
From April 2023, businesses will be able to raise up to £250,000 under the SEIS scheme, up from £150,000.
To allow more companies to use SEIS, the total assets limit will be raised from £200,000 to £350,000. Also, the trading age for companies will be raised from two to three years.
Good news for investors too. The annual investor cap he doubles to £200,000.
Our data shows that over 70% of early stage rounds go through the SEIS scheme. The government’s decision to increase this total funding is therefore crucial in allowing founders to raise more during difficult times. It does this by de-risking investment opportunities for investors who are increasingly pressured by the market to make risk-averse decisions.
It’s very exciting for early stage fundraising and we hope it will somehow help ease the difficulties facing founders.
Abbie Main
No announcement on R&D tax relief scheme
There has been no direct announcement regarding changes to the R&D scheme. However, the cancellation of the corporate tax rate increase means that claims under the RDEC scheme will be more favorable.
- RDEC’s claim after April 2023 would have been worth 9.75 pence for every pound spent on R&D
- After the increase is repealed, RDEC’s claim is worth 10.53 pence for every £1 spent on R&D.
Increased CSOP value
Companies will be able to offer share option schemes (also known as Corporate Share Option Plans (CSOPs)) from a current value of £30,000 up to £60,000.
![Mo Said]()
This is good news for companies that are too large to qualify for EMI or do not meet trading standards.
Employees and everyone else associated with the company can double their income in a tax efficient way. , should help continue to foster innovation in the UK.
Mo Said
In summary
Today’s announcement from the Treasury Department marks a change in direction compared to 2021 and aims to benefit businesses of all sizes across the board. Businesses will no longer have to worry about increased corporate tax and national insurance burdens, and increased SEIS thresholds will allow startups to thrive further.
SeedLegals are experts in helping businesses grow and scale. Our services, such as SEIS Advance Assurance and Share Option Schemes, help start-ups to take full advantage of the support the Treasury provides to UK businesses. Please contact us.
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