Never since the Howe Budget of the 1980s has there been such an impactful budget on income tax, specifically on Higher earners. The government strategy is to bank on a growth spike by putting money back into the pockets of consumers and in so doing, reboot ‘trickle down’ economics and resurrect Reaganomics.
This seismic Budget, which will include a further £600m for the Scottish Government, will further widen the policy differences between Westminster and Holyrood, with the Scottish Government under pressure to respond to, amongst others, the increased threshold for stamp duty, scrapping of the 45% tax rate and reduction in the basic rate to 19% for all - or reject them outright. The proposed new Enterprise Zone strategy with considerable tax reliefs is another area where Scotland needs clarity.
Whatever the politics, business is a winner with a raft of changes that will reduce taxes, boost cash flow and profitability and hopefully stimulate economic growth. Many attractive incentives and allowances already remain in place, and we would encourage all business owners to ensure that they are taking full advantage.
The UK is now technically in recession, and with the added headwinds of rising inflation, soaring interest rates and costs across the board, SMEs need every assistance available.
Clearly the dash for growth is a high-risk strategy that could be a winner for GB Plc and leave our international competitors trailing. Or it could lead to soaring inflation, a damaging run on the plummeting pound and long-term economic damage.
Should the strategy fail to work, it is always worth being reminded that the UK is the market for most Scots’ SMEs and domestic demand will probably be less affected by the ebb and flow of international financial markets.
Key Business Points
- Corporation Tax will remain at 19% rather than increasing to 25%
- Annual Investment Allowance is being pegged at £1m
- IR35 rules will once again allow contractors to determine their tax status
- NIC increases for both employers and employees have been scrapped
- Proposed Health and Social Care levy will be scrapped
- No changes to dividend tax rates which will benefit entrepreneurs
Existing Incentives
Several attractive allowances remain for businesses and entrepreneurs, including:
130% Super Capital Allowances. Invest and cut tax up to April 2023
R&D Tax credits. R&D Tax credits provide a tax break with a cash refund.
Patent Box. A Patent relief that reduces profits to as low as 10%.
Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief). Dispose of shares, sell, or retire with a personal capital gains tax rate of 10%.
Employee Ownership Trusts. The 0% tax on sale of a business to your staff
The Employment allowance £5,000 for many small businesses
Zero VAT for energy saving materials. Applicable to businesses selling solar panels or heat pump systems.
Structures and Buildings Allowances. 3% can be deducted from the cost of construction and renovation of non-residential structures and buildings.
100% allowance remains for zero emission cars. Write-off the cost of an electrical vehicle against profits coupled with generous benefit-in-kind allowances.
Scots’ SMEs are the backbone of the Scottish economy and central to the economic, political and social fabric of our nation. Their health and vitality is probably more important than any other sector. This Budget will make life easier for the small business owner and that has to be applauded.
By Donald Boyd, Head of Growth with Azets
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here