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Chancellor Kwasi Kwarteng backs enterprise in bid to fire up economy

Mini-Budget: Chancellor Kwasi Kwarteng

Chancellor outlines measures to boost business investment alongside scrapping plans to raise corporation tax

  • The rise in corporate tax eliminated
  • Stimulation of investments for companies
  • New aid for start-ups

Mini-Budget: Chancellor Kwasi Kwarteng

Mini-Budget: Chancellor Kwasi Kwarteng

The Chancellor outlined measures to boost business investment alongside dropping plans to raise corporate tax.

In a mini-budget that shocked markets – the pound fell below $1.09 for the first time since 1985 – Kwasi Kwarteng pledged to make the UK “a nation of entrepreneurs”.

As well as scrapping the proposal to raise corporation tax from 19% to 25% due in April and introducing an “unprecedented package of tax incentives” for businesses, he unveiled a package to boost the investment.

The annual investment allowance – tax relief for businesses investing money in new plant and machinery – has been set at £1m permanently.

This has increased in recent years, complicating investment planning for machine-intensive industries, such as agriculture and manufacturing. It was due to fall to £200,000 a year next April. But Kwarteng said he will ‘stay at £1m…permanently’.

Shevaun Haviland, chief executive of the UK Chambers of Commerce, said: “Businesses will be delighted. It is a crucial tool that gives them the confidence to pursue their investments and will add greater certainty to their plans.

The pro-business tone marked a significant shift after tax hikes under Rishi Sunak and Boris Johnson’s infamous ‘F*** business’ comment in 2018.

Craig Beaumont, head of external affairs at the Federation of Small Businesses, said: ‘What we’ve seen is a change in tone from previous f***business, high-tax Conservatives, a host of measures who support every business in this country. It’s definitely a clean break.

“The Truss government is off to a good start. The Chancellor rightly recognized that it was essential to abolish taxes on jobs, investments and entrepreneurs. Kwarteng has moved to help startups, by expanding venture capital trust and business investment schemes offering tax breaks to investors who buy new shares in unlisted companies. It will ‘speed up’ reforms to the cap on pension charges, allowing pension funds to invest in riskier UK assets.

The moves were warmly welcomed by the investment community, with Stephen Page, managing director of SFC Capital, saying they “will have made the ears of entrepreneurs, angels and venture capitalists prick up”.

At the same time, Kwarteng said limits on the seed business investment program and companies’ stock option plans would increase to “make them more generous”. In the first case, companies will now be able to raise £250,000, which is 66% more than before. Kwarteng said: “We want this country to be an entrepreneurial shareholder democracy. These are crucial steps on the path to making this nation a nation of entrepreneurs.

Russ Shaw, of Tech London Advocates, said: “Thousands of people have used these investment schemes and they have been hugely successful in supporting equity investment in UK businesses.”

Alex Davies, Wealth Club chief executive, said: ‘The announcement will provide much needed funding to start-up businesses at a time when we really need it.’

  • Reforms to IR35 accounting rules will be removed to simplify the tax system. IR35 was intended to prevent freelancers from working for a company or council as a full-time employee without having to pay the additional tax that this involved. Changes in 2017 and last year placed the onus on organizations to assess whether these workers were self-employed or employees. Some said the changes, which will be reversed in April, risked hurting self-employed workers and freelancers.

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