Support still needed for small businesses as Spring Statement doesn’t deliver

by Lee Murphy, managing director at The Accountancy Partnership

Following the spring statement from the Chancellor, business finance experts, The Accountancy Partnership, say more support is urgently needed for SMEs as the country recovers from the coronavirus pandemic and the rising cost of living.

Lee Murphy, managing director at The Accountancy Partnership, said: “The spring statement will not reassure small business owners, who are still feeling the impact of Covid, Brexit, the supply chain crisis and recruitment shortages, topped by the effects of the war in Ukraine.

“Efforts to address the cost of living crisis through the tax and national insurance (NI) system fall short against record inflation rates. Plans for an increase in National Insurance contributions will go ahead, however, the threshold has been increased to £12,570, which will benefit businesses with lower income earners.

“The increase to the National Insurance threshold means that directors in their own limited companies can pay themselves a higher salary whilst remaining tax efficient. But it’s crucial to remember the effects of the new Health and Social Care Levy, which will impact the amount of dividend tax they pay. Efficient tax planning is just as crucial as ever.

“The Employment Allowance increase to £5,000 will reduce employers’ National Insurance bills for small businesses that are planning to employ workers, which has the potential to stimulate job creation for those that employ two or more people.. However, microbusinesses and sole directors that don’t employ enough people are omitted from the benefit.

“The cut to fuel duty on the surface is promising, however in practice, it will only reduce the cost of a tank of fuel by £2-3. Those small businesses that cover lots of miles will not see a real benefit, and it is still to be seen if there will be further rises in the cost of fuel due to the on-going war in Ukraine.

“Support for businesses facing soaring energy prices is also missing, putting further pressure on businesses’ operating costs. This is reflected in the FSB’s new research which found a worrying 5% of businesses do not think they’ll survive the next three months. More must be done to prevent the price increase from being passed on to customers, further increasing inflation.

“The importance of small businesses to the economy must not be understated, they make up 99% of all UK businesses and contribute trillions of pounds to the economy. SME owners have been disproportionately impacted by the pandemic and their demise will result in the loss of jobs and opportunities in many areas of the country. Greater expectation will be piled on to the budget in the autumn to support UK SMEs.”