This year has been a time full of concerns for businesses. Rising costs, staff shortages, and supply chain disruption have affected all types of companies, and now soaring energy prices are another issue you’re likely to have to navigate.
A report from the Office for National Statistics (ONS) reveals that 70% of businesses had some form of concern for their business this October, with this percentage rising to 83% for businesses with 10 or more employees.
Research conducted by Simply Business found that 54% of small businesses believe that increased energy and fuel costs are their biggest challenge.
During and ahead of the mini-Budget at the end of September, the government announced a range of measures that could help to reduce the worries that you may currently have. So, read on for the key announcements that will affect you as a business owner.
The Energy Bill Relief Scheme could reduce your energy bills by around 50%
Energy prices have risen across the world due to supply and demand issues in the global wholesale market.
They first started to increase as energy consumption rose after the Covid-19 pandemic. More countries began to reopen, and more people started to work and spend again, leading to more energy being used.
Then the war in Ukraine reduced supplies of Russian gas worldwide due to sanctions imposed on Russia.
To help businesses cope with rising energy prices, the recently announced Energy Bill Relief Scheme will give businesses a discount on their bills along similar lines to the support on offer to households. This relief is based upon a “government-supported baseline price”.
The government has stated that it expects energy costs to soar to £600 a MWh for electricity and £180 a MWh for gas.
So, to save businesses from this sharp increase in bills, they have capped this price for businesses at £211 a MWh for electricity and £75 a MWh for gas, initially until 31 March 2023.
The government website contains more details, along with some examples of potential cost savings.
The discount will be applied automatically to your bills from November 2022.
The scheme will officially end on 31 March 2023, but new chancellor Jeremy Hunt has announced a Treasury review to establish what, if any, further support businesses will need.
Scrapping the National Insurance (NI) rise could save you £9,600 a year
From 6 November 2022, the government announced that they are scrapping the National Insurance (NI) rise of 1.25 percentage points introduced in April 2022.
This will mean that your employer National Insurance contributions (NICs) will likely fall from November 2022.
The government reports that this tax cut will reduces 920,000 businesses’ tax liabilities by £9,600 on average in 2023/24. This is 60% of the UK’s businesses with employer NICs liabilities.
Rising interest rates could increase the cost of borrowing
The cost of living is increasing at nearly its fastest rate in 40 years, driven by rising food costs, fuel costs, increases to the price of raw materials, all linked to the war in Ukraine and the global emergence from the Covid-19 pandemic.
This has led UK inflation to reach 10.1%, which is much higher than the Bank of England (BoE) target of 2%.
To mitigate rising inflation, the BoE has raised interest rates seven times since December 2021, with the base rate now standing at 2.25%. The market reaction to the government’s mini-Budget also sent the cost of borrowing higher, with many banks and building societies raising the price of mortgages and loans.
Consequently, you could see a rise in the cost of your business borrowing, or a hike in the cost of your residential mortgage when your existing deal comes to an end.
Some disappointing news regarding Corporation Tax
In his mini-Budget on 23 September, the former chancellor, Kwasi Kwarteng, announced that Corporation Tax would not rise in April 2023 as previously announced.
However, in the aftermath of the speech, the government performed a U-turn on this issue. So, as a business owner, you can still expect Corporation Tax to rise in April 2023 as originally planned.
Get in touch
We understand that times are tough. If you would like further advice or to discuss your concerns about what government announcements mean for your business, please get in touch.
Email hello@sovereign-ifa.co.uk or call us on 01454 416 653.
Please note
This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.
