Spring Statement: Sunak announces new tax cuts for small businesses

Sunak says the business rates discount coming into effect next month for retail, hospitality and leisure businesses will save them up to £110,000, with a typical pub saving £5,000.

The 50% business rates relief package is worth £1.7 billion for small businesses. The Help to Grow Management and Digital schemes, worth thousands of pounds per business, and the £1 million Annual Investment Allowance are also available to continue supporting UK businesses.

Sunak also announced that a new tax cut for small businesses, an allowance for workers they employ, will save them up to £1,000.

The government has increased the Employment Allowance – a relief which allows smaller businesses to reduce their employers National Insurance contributions bills each year – from £4,000 to £5,000. The cut is worth up to £1,000 for half a million smaller businesses and starts in two weeks’ time, on 6th April. As a result, 50,000 of these businesses will be taken out of paying NICs and the Health and Social Care Levy, taking the total number of firms not paying NICs and the Levy to 670,000.

The Chancellor also announced two new business rates reliefs will be brought forward by a year to come into effect in April 2022. There will be no business rates due on a range of green technology used to decarbonise buildings, including solar panels and batteries, whilst eligible heat networks will also receive 100% relief. Together these are expected to save businesses more than £200 million over the next five years.

Douglas Grant, CEO at Manx Financial Group, said: “The Chancellor’s announcement today about the upcoming tax rates cut for businesses in the hospitality, leisure and retail sectors by 50% next month is welcome news and a relief for these sectors, which are reliant on inward tourism and which were always going to need targeted Government support. Nevertheless, questions remain as to whether the pledged support goes far enough, especially against the backdrop of unprecedented challenges in the labour market, due to the shortage and rising cost of staff.

"Indeed higher interest rates will disproportionality affect small businesses reliant on funding in the early stages of their growth and this exacerbates the UK SME debt burden and zombie status of weak businesses that continue to service their debt piles with many falling off a loan default cliff. It’s high time we address the question - how is this debt ever going to be paid back and is it in the interest of the UK economy to continue to support all SMEs? It is also important that businesses urgently address their debt levels rather than inadvertently ‘giving’ cash away through high interest payments and poor financial management.”