liz truss tenure small businesses

UPDATED – Liz Truss’ Tumultuous Tenure- Is There Any Good News For Small Businesses?

We’d scheduled this blog post with lots of helpful information for small businesses off the back of the budget. But things have gone from bad to worse for the now ex-PM in between writing and publication. So we’ve updated things a little and hopefully, you can still pull some helpful information from it!

It’s hard to imagine a more disastrous tenure for a new Prime Minister. Sure, it was never going to be easy with the state of the country at the moment, and with 10 days of her initial tenure paused due to the death of the queen. But it almost seemed as if her decisions managed to make the situation even worse. The early decisions the government made have affected everyone from small businesses to sole traders.

With the media focus naturally being on the negatives, are there positives that we can take from any of her decisions when it comes to small businesses? Keep reading to find out!

What Went Wrong With the Budget?

Kwasi Kwarteng’s mini-budget was under fire as soon as the words left his lips, and it ultimately cost him his job. The scrapping of the 45% tax band and other seemingly rash, not-thought-out tax cuts, had a catastrophic impact on the value of the pound, with its value falling to a record low against the dollar. In a desperate attempt to save face, the Lady Not For Turning, turned.

Under the new chancellor Jeremy Hunt, the 45% tax band was reinstated, the lower band cut from 20% to 19% was canceled, and both party and nation lost any trust in the integrity of their leader. It was the beginning of the end of Truss, even though she said she was simply “listening to the people”.

So Where’s the Silver Lining For Small Businesses?

In amongst all the doom and gloom of the cost of living crisis, the ongoing conflict in Ukraine, and soaring interest rates, is there anything for small businesses to cling onto that might give them hope of staying afloat? 

Thankfully, the answer to that question is yes. 

Raising the Definition of Small Business

At the point of her speech on Sunday the 2nd of October at the annual conference of the Conservative Party, a small business was a company with fewer than 250 employees. In her speech she outlined plans to increase this to companies with fewer than 500 employees (in terms of regulation).

What does this mean? According to the statement released by the Prime Minister’s office, it means “thousands of the UK’s fastest-growing businesses will be released from reporting requirements and other regulations in the future, as part of plans aimed at boosting productivity and supercharging growth”.

Corporation Tax Increases Scrapped… And Then Reinstated

In Kwasi Kwarteng’s budget, the planned increase in corporation tax was scrapped. This would have been good news for many small businesses that are over the £50,000 threshold for the main rate of 19% – freeing up money that businesses would have set aside for the tax hike. At a time when inflation rates are rising, this was a welcome piece of news.

But, it wasn’t to be. The change was reversed as part of the government’s new plan. While this isn’t exactly good news, most businesses were prepared, or preparing for an increase so at least it won’t be a huge shock.

Annual Investment Allowance Extended at £1m

For businesses looking to make sizeable investments, there is great news in that the AIA has been extended at its current amount of £1m per year. This means that businesses can set 100% of spending on plant and equipment up to that value against business profits in the year the expense is incurred. 

There were plans for a reduction in allowance to £200,000 from 2023, so businesses can take advantage of this extension and cut down on taxes on investment.

Do You Run a Small Business? 

If you run a small business, or have recently been able to call yourself as a small business thanks to the new definition, allow us to introduce ourselves! We are an accountancy firm based in Nelson and Warrington. Times are tough at the moment, and a little guidance through the uncertainty is something we aim to provide.

Get in touch with us if you’re looking for an accountancy solution that offers both in-person and remote services. Make sure you’re taking advantage of the benefits we’ve mentioned in this article – speak to us today! And check out some more of our helpful blogs on the site.

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