Spring Statement: What small businesses need to know

A round-up of the measures of interest to small business owners in the 2022 Spring Statement as well as entrepreneurs' reaction to the speech.

Enterprise Nation's reaction to the Spring Statement

We are disappointed by the speech with little positive news for small businesses. In our report with the Entrepreneurs Network, we called for measures including allowing businesses with less than five staff to access the government's flagship Help to Grow training and digital software schemes. Chancellor Rishi Sunak failed to do it.

Emma Jones, founder of Enterprise Nation, said:

"We wanted a confidence boost for small business today but what we got was confirmation of existing schemes and reliefs.

"The employment allowance will be welcome but today's statement was more about politics than enterprise. There may be a tax plan but that's not enough to energise the small business base on which we so much rely to power the economy and local communities.

"There is an urgent need for small businesses and the groups that represent them to be part of the summer consultation as small businesses from the Enterprise Nation member community made their voices heard in a live blog today with words including 'underwhelming' and 'disappointing' summing up the mood.'"

Comments from Enterprise Nation members in our live blog included:

• Karen Watkins: "There were no major wins. I think this will be the final nail in the coffin for many small businesses over the next 6 months."

• Catrin MacDonnell: "Disappointing for small businesses."

• Samantha Oakley: "As small businesses, we need to make our voices louder!"

• Ian King: "Really disappointing for small businesses all in all."

Small business measures in the Spring Statement 2022

Increase to National Insurance threshold

Despite pressure from business groups, the chancellor refused to cancel the introduction of the controversial National Insurance and dividend tax increase for the new Health and Social Care Levy saying "it is right that the health and care levy stays".

However, Sunak did announce an increase to the threshold under which no National Insurance is paid. It will increase to £12,570 from July 2022. This matches the income tax threshold.

The government says the change will benefit almost 30m working people and is a tax cut for a typical employee worth over £330 in the year from July 2022 and £250 for a typical self-employed person. Experts say it will mostly benefit those earning under £35,000.

The government is also reducing Class 2 NICs payments for lower earning self-employed individuals. From April 2022, they will not pay Class 2 NICs on profits between the Small Profits Threshold (£6,725) and Lower Profits Limit, but they will continue to be able to build up National Insurance credits. This amounts to a reduction of up to £165 a year, the government says.

Basic rate income tax cut

The basic rate of income tax will be reduced from 20% to 19% before April 2024. This is the first cut in the basic rate of income tax in 16 years.

Cut to fuel duty

With petrol pump prices at unprecedented levels due to issues including the war in Ukraine, the government is introducing a temporary 12 month cut to duty on petrol and diesel of 5p per litre from 6pm on 23 March 2022 until March 2023.

The government says this represents a saving of around £100 for the average car driver, £200 for the average van driver, and £1500 for the average haulier, when compared with uprating fuel duty in 2022-23.

The cut has been welcomed but diesel costs have risen by 40% over last year so businesses' transport costs are still very hard. A representative of hauliers told BBC News that all the cut has done is return businesses to the cost of fuel last year.

Increase to Employment Allowance

The Employment Allowance, which allows businesses to reduce their employer National Insurance contributions (NICs), will be increased from £4,000 to £5,000 from April 2022. The government says this means businesses will be able to employ four full-time employees on the National Minimum Wage without paying employer NICs.

It claims the measure will benefit around 495,000 businesses, including around 50,000 businesses which will be taken out of paying NICs and the Health and Social Care Levy entirely.

Business rates

The Spring Statement confirmed the previously announced temporary 50% business rates relief for retail, hospitality, and leisure businesses, up to £110,000. The government says the average pub, with a rateable value of £21,000, will save £5,200; the average convenience store, with a rateable value of £28,500, will save £7,000, and the average cinema, with a rateable value of £95,500, will save £24,000.

Another previously announced move is that the business rates multiplier will be frozen in 2022-23.

Two other previously announced new business rates reliefs will come into effect in April 2022, a year earlier than planned.

Making green technology, including solar panels and heat pumps, will be exempt from business rates. The government says this will save businesses an extra £35 million in 2022-23. A 100% relief for eligible low-carbon heat networks which have their own rates bill will also be available.

Research and development

The government has previously announced reforms to R&D tax reliefs to data and cloud computing costs.

The Spring Statement announced an expansion of the qualifying expenditure to include all mathematics. The government said this will support nascent sectors where the UK has a comparative advantage such as artificial intelligence, quantum computing and robotics while also supporting strong sectors such as manufacturing and design.

Sunak said the government will announce more R&D reforms in the autumn Budget later this year.

Reforms to business tax

The government has promised to "cut and reform taxes on business investment". It said it will consult with businesses and confirm plans in the Autumn Budget later this year.

Skills and apprenticeships

"We lag international peers in adult technical skills," Sunak said in his speech. "Just 18% of 25-64 year olds’ hold vocational qualifications, a third lower than the OECD average. And UK employers spend just half the European average on training their employees."

He said the government will "consider whether the current tax system, including the operation of the Apprenticeship Levy, is doing enough to incentivise businesses to invest in the right kinds of training." The Apprenticeship Levy is a tax on large employers which is used to fund apprenticeship training.

What Rishi Sunak didn't announce

As mentioned above, the chancellor did not respond to pressure to widen the eligiblity of the Help to Grow schemes for small businesses.

He did not mention VAT which is due to return to 20% for hospitality companies from April. It is currently at 12.5% and groups, including Enterprise Nation, have called for it to remain at that level to help businesses.

The online sales tax was not mentioned in the statement. The government is currently consulting on introducing it. Enterprise Nation and the Entrepreneurs Network have called for it to not be introduced.