The Budget routine has been a bit on and off over the last few years (actually quite like our plans over the last 12 months!). Then the other month we had a big one….
On 27th October, the Chancellor set out the 2021 Autumn Budget as well as the three-year spending review. We’ve summarised a number of the key aspects below affecting business owners….
Because this can be quite a dry subject filled with numbers, percentages and technical terminology which would lose even the most eager beaver after the first sentence, we decided to deliver just the important bits…. sure you are free to go and read the whole thing if so desired for that sleep inducing bedtime reading!
Our top points:
- All National Insurance contributions at all rates will be increased from 6 April 2022 by 1.25%, the percentage may not seem like a lot but the resulting cost won’t go unnoticed off your bottom line.
- With the increase in corporation tax from 19% to 25% (starting in the financial year from 1 April 2023), pre year end tax planning with your adviser becomes more vital…..
- Extension to the tax relief you get when you acquire a new asset for your business *
- Business Recovery Loan Scheme extended to 30 June 2022 – apply for a loan up to £2million, 70 per cent backed by the Government, this was due to close for new application s on 31 December 2021. Time to get the funding for that new project!
- The rate of income tax on dividends will be increased by 1.25% from 6 April 2022. The tax free dividend allowance is unchanged at £2,000. **
* Companies get an Annual Investment Allowance (AIA) for purchasing capital items, this will remain at £1million per annum until 31 March 2023, rather than the previously scheduled 1 January 2022. This can be claimed back on all plant and machinery invested in by the business (up to the allowance).
** This means that the dividend tax rates will become as follows: Up to £2,000 – Nil, Basic rate – 8.75%, Higher rate – 33.75%, Additional rate – 39.35%
After all that let’s raise a glass to cheer our spirits as….
In support of the hospitality industry, the government will cut alcohol duty on draught beer and cider by 5%, and freeze the rates of all other alcoholic products.
Making Tax Digital (MTD) for Self Assessment for sole traders and landlords with over £10,000 in income has been delayed by a year until 6 April 2024.
SOME BRAND NEW TAXES!!
1. Health and Social Care Levy
As a completely radical move titled the Health and Social care Levy – as referred to in the point above regards the 1.25% increase in national insurance – interesting as that is the only tax that cares about your date of birth! (As when you reach pensionable age you no longer need to pay it). HOWEVER this levy will be payable by those above the Pensionable Age from April 2023 on earnings above the Primary Threshold (around 29 million individuals will lose out)…….
The government has announced that the ‘Health and Social Care levy’ will be spent on the NHS and social care in the UK.
2. Residential property developer tax
As you may have read in our preview of the budget, we now have more details about this! Aimed at the larger housebuilders – the chancellor announced that this new tax, which will begin 1 April 2022, will be charged at 4%, and on profits of residential development activities above £25m. This will include businesses who deal in the design, planning and marketing of new residential property. Albeit this is not a tax for an SME, if these companies are your customers or suppliers, could there be a knock on effect?
Anything else and the economy
If you are still with us there is some good news on this! – The growth forecasts for the UK economy have been increased – to 6.5% in 2021, 6% in 2022, and 2.1% in 2023. Also, unemployment projections are now suggesting that 2 million fewer people will be unemployed compared to what was forecasted previously.
However the bad news – Inflation is expected to rise to around 5%, from the current 3% figure. In an attempt to combat this for low-earners, the government will be increasing the national living wage by 6.6% to £9.50 per hour (from April 2022).
Beware: the Bank of England will worry about out of control inflation…. to control this we predict a rise in the bank base rate of interest part way through 2022.
The government has introduced a 3% surcharge on corporation tax for banks, essentially meaning that they will be paying 28% of their profits in corporation tax.
Get in touch!
If you have any questions regarding the changes in tax rates then do not hesitate to get in touch with us using the form below or we love to talk so call 01730 719250!