Predictably, the focus of Rishi Sunak’s Autumn Budget was on stabilising public finances after the COVID-19 pandemic and encouraging economic growth and recovery for the country.
Chancellor Rishi Sunak has announced the Government’s Autumn Budget. Predictably, the focus was on stabilising public finances after the COVID-19 pandemic and encouraging economic growth and recovery. But there were some changes that were welcomed such as the increase in National Living Wage and other changes set to affect taxes which business owners should be aware of.
It was a budget that has divided the business community, with the majority of small business owners pleased with the commitment to increase skills funding but disappointed by the reintroduction of the 20% VAT fee. UK Business Forums (UKBF) founder Richard Osborne said: ‘There were some positive announcements in the Budget, such as the one-off 50% discount on business rates for retail, leisure and hospitality businesses, and next year’s business rates multiplier being cancelled, however, they will only benefit a small number of small businesses and multiple sectors have suffered blow after blow since the pandemic began.’ (Source)
National Insurance
Health and Social Care Levy
The 1.25% Levy will apply across the UK with an increase in Class 1 (Employee, Employer) and Class 4 (Self Employed) National Insurance contributions (NICs), and to the main and additional rates.
The Levy will not apply to Class 2 NICs or Class 3 NICs. The Levy will be introduced from April 2022, when NICs for working age employees, self-employed people and employers will increase by 1.25%.
From April 2023, once HMRC’s systems are updated, the 1.25% Levy will be formally separated out and will also apply to the earnings of individuals working above State Pension age, and NICs rates will return to their 2021/22 levels.
Dividend tax rates
As previously announced, the rates of income tax to be paid on dividend income will increase by 1.25%.
The dividend ordinary rate will be 8.75%, the dividend upper rate will be 33.75% and the dividend additional rate will be 39.35%. The dividend trust rate will also increase to 39.35% to remain in line with the dividend additional rate.
The changes will apply UK-wide and will take effect from 6th April 2022.
(See also: What Effect Will the New Health and Social Care Levy Have on Company Directors and Dividends?)
Pensions and savings
The government is temporarily suspending the earnings element of the ‘Triple Lock’ used to uprate the State Pension and Pension Credit. For 2022/23, the basic State Pension, Pension Credit and survivors’ benefits in industrial death benefit will increase by the higher of CPI or 2.5%.
The band of savings income that is subject to the 0% starting tax rate will remain at its current level of £5,000 for 2022/23.
National Living Wage
The National Living Wage (the minimum wage for those aged 23 years and above) will be increased by 6.6%, from £8.91 to £9.50 per hour. Workers aged below 23 years are eligible for the National Minimum Wage, which is also increasing for:
- 21 to 22 year olds by 9.8% from £8.36 to £9.18 per hour
- 18 to 20 year olds by 4.1% from £6.56 to £6.83 per hour
- 16 to 17 year olds by 4.1% from £4.62 to £4.81 per hour
- Apprentices by 11.9% from £4.30 to £4.81 per hour
Capital Gains Tax
The Chancellor previously announced the capital gains tax (CGT) annual exempt amount of £12,300 would be frozen until 2026. Basic-rate taxpayers will continue to pay 10% on capital gains above this amount, while higher-rate taxpayers pay 20%.
Corporation Tax
As previously announced, Corporation Tax will increase from 19% to 25% from April 2023 when a company’s profits are over £250,000. The tax will remain at 19% for profits up to £50,000, with a tapered increase up to the main rate of 25% when profits reach £250,000.
Business rates
The Chancellor confirmed business rates revaluations will now happen every three years, with the first new revaluation cycle planned for 2023. From 2023, every business will be able to make property improvements and for 12 months, pay no extra rates because of a new ‘business rates improvement relief’. The planned increase in the business rates multiplier in 2022/23 has been cancelled.
The Chancellor also announced a new, temporary 50% business rates discount for businesses in the retail, hospitality and leisure sectors, including pubs, music venues, cinemas, restaurants, hotels, theatres, and gyms. This means, from 2022, any eligible business in these sectors can claim a discount up to a maximum of £110,000.
The government is introducing a new relief to support green technologies which means until 2035, plant and machinery used onsite for renewable energy will be exempt from business rates.
Research & Development (R&D) tax relief
The system of R&D tax relief is being reformed. The government is expanding qualifying expenditure to include data and cloud computing costs and is refocusing the reliefs towards innovation in the UK.
Annual Investment Allowance (AIA)
The government is extending the temporary £1 million level of the Annual Investment Allowance to 31 March 2023. The change is designed to encourage businesses to bring forward investment, and make tax simpler for any business investing between £200,000 and £1 million.
Business Recovery Loan Scheme
The Business Recovery Loan Scheme is being extended to 30th June 2022, with finance up to a maximum of £2 million per business available to assist recovery from the impact of the COVID-19 pandemic and to grow. The government guarantee will be reduced from 80% to 70%.
Fuel duty
As in previous budgets, the Chancellor decided there should be no increase in fuel duty.
Alcohol duty
The alcohol duty regime is being simplified, reducing the number of main rates from 15 to six, and taxing all products in proportion to their alcohol content. The government is also simplifying the way businesses register and pay for duty, ending the practice where individual products have different administrative rules.
Alcohol will be taxed with higher strength products incurring proportionately more duty, and new rates for low strength drinks below 3.5% ABV. The government will also introduce a new small producer relief, for cider makers and other producers of lower ABV drinks. The government will cut duty rates on draught beer and cider by 5%, taking 3p off a pint, with the duty rates on beer, cider, wine and spirits frozen for another year.
Angel investors and start up loans
Good news for those entrepreneurs across the country trying to get a start-up off the ground, angel investors will be made available to businesses outside of London and the South East.
Funding of £150 million from the British Business Bank to encourage the development of regional networks of angel investors, and help boost entrepreneurship.
Start Up Loans funded by the Government to deliver 33,000 loans to entrepreneurs across the UK looking to start or grow their business.
For further advice on how the Autumn budget affects your business, especially on the subject of business recovery in the post-COVID era, contact Voscap today at 020 7769 6831 or email team@voscap.co.uk to speak to one of our business recovery specialists.
