Interest Rates and Incentives to Invest

The Bank of England has confirmed that base rates remain unchanged for the time being. However, with inflation heading to its highest level in more than a decade, the surprise decision comes with a warning. Rates will be increasing in 2022.

Irrespective of their decision, all our funding panel are advising that money market rates are increasing. This suggests the cost of borrowing is already on the rise. That said, for those old enough to remember double-digit base rates, the cost of borrowing is still low and attractive terms are available for the time being. Are you considering buying assets or re-structuring your business finances? It may be wise to consider this now rather than wait for rates to increase.

At the recent Budget and spending review, there were several positive announcements for SME businesses aimed at encouraging growth and investment as we head towards 2022

The Government’s Recovery Loan Scheme (RLS) that was due to expire at the end of December 2021 has been extended until 30th June 2022. RLS provides flexible access to a range of business funding with little or zero security required. We have access to a diverse range of lenders who can support RLS asset finance, asset refinance, business loans, and invoice finance top-ups. Call us now to enquire.

Annual Investment Allowances (AIA) were due to reduce from £1m back to £200,000 at the end of December 2021. The £1m limit will now run until the end of March 2023. This is great news for anyone buying plant, machinery, equipment, and commercial vehicles. In effect, any assets up to £1m can be fully offset against tax in the year of purchase. So, if you buy an asset for £500,000 you can fully offset this against taxable profits. At the current underlying rate of 19%. this would save you £95,000.

The Super Deduction allowance, which was introduced in March 2021 budget, currently allows only ‘new’ asset purchase to be fully offset, and this also runs until the end of March 2023. Important – this is for limited companies only.

The AIA allows any ‘used assets’ to be fully offset in the first year and provides non – limited businesses with full offset relief against tax up to £1m per annum.

For more information on the super-deduction allowance, read here.

Combining the tax incentives with current low-interest rates is the perfect climate to consider making those asset purchase decisions. Rates are on the move in 2022 so act now to avoid increasing finance costs.

Got any questions? Get in touch with our team of experts to understand how we can support you and answer your queries. Please call us now on 0161 633 2548 if you would like to talk to one of our experts.

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