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James Shipp, of Lovewell Blake, explains some of the ramifications of last week's mini-Budget

Well, no-one can say that Liz Truss’s government is not implementing the policies she set out during her leadership campaign – in fact, Friday’s mini-Budget went considerably further than most of us expected.

The much-trailed reversal of the rise in Corporation Tax will be welcomed by many of our region’s businesses – it would have been a huge jump for SMEs, which are such an important part of our local economy. The proposed six per cent hike would have been a blunt instrument, and it’s important that businesses don’t end up paying punitive rates of tax which discourage investment.

Likewise, the reversal of Rishi Sunak’s National Insurance increase will be welcomed, especially as it applies not just to the employee National Insurance contributions, but to employer contributions, and indeed the recently increased rate of tax business owners pay on their dividend income. This now falls back to the previous rate of 7.5 per cent.

James Shipp, Lovewell Blake
James Shipp, Lovewell Blake

But for many businesses, it will be the business energy price cap announced earlier in the week which will bring the most immediate benefit, both in terms of containing costs and its important effect on reducing inflation, perhaps by as much as four or five percentage points.

The fact that the business cap is only for six months (as opposed to the consumer cap, which is until 2024) means there remains considerable uncertainty for businesses which typically contract their energy for one or more years. It will be important that the review into further help once the six months is up happens quickly, to enable businesses to plan.

The simplification of IR35 rules is good news for our region, particularly the oil and gas sector, where we have seen many genuine contractors unable to operate as businesses, due to client companies being cautious of falling foul of IR35. The devil will be in the detail, but hopefully the current ‘blanket approach’ will be removed and our local contractors can revert to operation as small businesses and not employees.

Lovewell Blake
Lovewell Blake

Making the £1 million Annual Investment Allowance permanent is a positive step; I would like to see a similar decision made about the ‘Super Deduction’ allowance, which has hugely encouraged investment, but which is due to expire in March. This should be high on the Chancellor’s priorities for the regular Budget in November.

Income Tax cuts are more aimed at individuals than business, but in the current climate they are important. Employers are facing mounting pressure to increase wages to help staff cope with the cost-of-living crisis, so anything which gives employees a bit more take-home pay will ease that pressure for employers too.

James Shipp is a partner at Lovewell Blake