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