What support is available for businesses as energy prices and operating costs surge?

With inflation surging in the UK, you may be concerned about how your business is supposed to continue operating at its current level amid rapidly rising costs.

Indeed, according to research by consultancy firm Cornwall Insight published by Professional Adviser, electricity costs for businesses will be four times that of prices in 2020.

This is no small issue for many businesses in the UK. In September, Bloomberg reported that 6 in 10 British factories could be at risk of going under due to soaring bills.

Similarly, the Financial Times reported a warning from the British Business Bank that small businesses are facing “serious headwinds” in the face of rising interest rates, high inflation, and supply chain disruption.

As a result, you may be looking for ways to financially secure your business. Fortunately, the government has responded with a range of measures that could help support businesses and keep them steady during this uncertain period.

Discover details of a few schemes and changes that might help your business in the coming months.

The Energy Bill Relief Scheme will cap business energy costs

Firstly, the government has announced an Energy Bill Relief Scheme to assist with the rising cost of gas and electricity in the UK.

With the Energy Price Guarantee (EPG) capping average annual bills at £2,500 for domestic households in the UK, the Department for Business, Energy & Industrial Strategy announced on 21 September that there would also be an Energy Bill Relief Scheme for non-domestic customers.

Initially in place from 1 October 2022 to 31 March 2023, the Energy Bill Relief Scheme will place caps on energy of:

• £211 per megawatt hour (MWh) for electricity
• £75 per MWh for gas.

This represents significant savings compared to the wholesale cost of gas and electricity – according to the government website, these are expected to be £180 per MWh and £600 per MWh respectively.

Your energy supplier should apply the discount automatically, so there will be no need for you to do anything to benefit.

This could save you a considerable amount of money over the coming months, especially if your business is particularly energy intensive.

The Annual Investment Allowance will permanently remain at £1 million

Another notable change that may help your business is the confirmation that the Annual Investment Allowance (AIA) will permanently remain at its £1 million level.

Using the AIA, you can claim 100% tax relief on plant and machinery investments for your business. This can include equipment, machinery, and business vehicles such as vans, lorries, and cars.

This allows you to deduct the full cost of these items from your pre-tax profits, reducing your tax bill at the end of the year.

The AIA was temporarily increased from £200,000 to £1 million in January 2019, and was set to return to its original level on 31 March 2023.

Instead, the government has confirmed that the AIA will remain at £1 million. That means you’ll continue to be able to tax-efficiently invest in plant and machinery for your business.

New investment zones could reduce your tax bill

Another change that may help you reduce your business’s tax bill over the coming years is the announcement of new “investment zones” across the UK.

These zones will be created by partnerships between the government and local administrations. These local authorities will need to complete an application to become an investment zone.

Initially, there were set to be around 40 investment zones but, according to the Financial Times, reports suggest that this could reach 100 or even 200, depending on the number of applications.

Businesses in these investment zones will receive many lucrative benefits, including tax relief on:

• Business rates – 100% relief on newly occupied business premises, and expansion into investment zones sites by certain existing businesses
• National Insurance – zero-rate employer National Insurance contributions (NICs) on new employees earning less than £50,270 a year who work in the tax site for at least 60% of their time
• Stamp Duty – full relief on land and buildings bought for commercial purposes.

These tax advantages could be hugely valuable to your business if you are located or able to expand into one of these investment zones, offering you the chance to buy business premises or hire new staff without incurring a tax bill.

Visit the government website to read even more about the benefits that businesses in the investment zones can receive.

Get in touch

If you’re a business owner looking to make the most of your money, we can help at Rosebridge.

Email enquiries@rosebridgeltd.com or call 01204 300010 to speak to us today.

A note on the current political situation

With the current political uncertainty in the UK right now, everything is changing quickly. So, it’s important to be aware that while the information in this article is accurate at the time of writing, rules and regulations are subject to change by the government and HMRC.

Of course, we’re always on hand at Rosebridge to explain anything that’s going on, offering you valuable reassurance during this period.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based solely on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority do not regulate tax planning.