Small businesses in the UK can benefit from a range of tax relief measures unveiled in the latest Budget, offering vital support amidst rising costs.

Employment Allowance boost

From April 2025, the Employment Allowance will increase from £5,000 to £10,500, and the £100,000 Employer’s National Insurance (NI) threshold will be removed.

However, limited companies with only one employee (who is also a director) remain ineligible.

The increase in the Employment Allowance will be a welcome move for small businesses, many of whom have been grappling with rising costs.

Removing the threshold also opens the doors for more businesses to benefit from the relief.

However, directors of single-employee limited companies will need to consider alternative ways to manage their Employer’s NI liabilities as they are still not eligible for Employment Allowance.

Corporation Tax stability

The Corporation Tax rate will remain at 25 per cent for this Parliament, with the following provisions preserved:

• Small Profits Rate – Businesses with profits under £50,000 continue to benefit from a reduced 19 per cent rate.
• Marginal Relief – Companies with profits between £50,000 and £250,000 can still reduce their tax bills with Marginal Relief.

Maintaining the Small Profits Rate and Marginal Relief is crucial for small businesses, especially those transitioning to higher profitability brackets. These measures provide much-needed flexibility in managing Corporation Tax obligations.

Capital Allowances extended

The core Capital Allowances regimes remain unchanged.

Full expensing, allowing 100 per cent first-year tax relief on qualifying purchases, has been extended, and the £1 million Annual Investment Allowance cap also stays the same on qualifying equipment.

Capital Allowances are a powerful tool for growth, freeing up cash flow for reinvestment by offsetting significant costs.

Research & Development (R&D) tax relief continues

Eligible SMEs can access enhanced R&D tax relief, including a 186 per cent deduction and payable credit for loss-makers for periods before April 2024. After this, a merged scheme applies.

Many small businesses are still unaware of R&D tax relief’s potential to drive innovation and ease financial pressures.

You should consult your accountant to explore your eligibility and the opportunities the relief provides.

Changes to business rates

From April 2025, Business Rates Relief for retail, hospitality, and leisure (RHL) properties will reduce from 75 per cent to 40 per cent, with a £110,000 cap.

However, the small business tax multiplier will remain frozen at 49.9p.

Key takeaways for small business owners

The Budget delivers a mixed bag of opportunities and challenges for small businesses.

Small business owners should take proactive steps to review their tax strategies in light of these changes.

With careful planning and the assistance of an experienced tax specialist or accountant, many of these measures can be leveraged to drive growth and protect profitability.

For tailored advice and guidance, contact our team.