How does the October 2021 Budget affect your Business?

Yesterday the Chancellor set out his annual budget along with the spending plans for government departments for the next three years. While there were a lot of spending announcements, in this blog we will focus primarily on the specific tax changes and spending announcements that could affect your business. We have put together some handy charts to make it easier for you to see what is changing. 

National Insurance

Although it was announced in September, the biggest change to the tax system coming from April is the rise in National Insurance to pay for health and social care. This will start with an increase in National Insurance of 1.25% for employers, employees, the self-employed and on directors dividends from April 2022, and then will become a separate “Health and Social Care Levy” instead from April 2023. 

The new rates will be:- 

National Insurance Current Rate 2022/23 2023/24
Standard (£797 to £4189 per mth) Higher

(£4189+ per mth)

Standard (£797 to £4189 per mth) Higher

(£4189+ per mth)

Standard (£797 to £4189 per mth) Higher

(£4189+ per mth)

Health & Social Care Levy
Employee 12% 2% 13.25% 3.25% 12% 2% 1.25%
Employer  13.8% 13.8% 15.05% 15.05% 13.8% 13.8% 1.25%
Self Employed

(Class 4)

9% 2% 10.25% 3.25% 9% 2% 1.25%

 

Dividends Tax Current Rate 2022/23 2023/24 Plus 2023/24 Health & Social Care Levy
Basic Rate 7.5% 8.25% 7.5% 1.5%
Higher Rate 32.5% 33.75% 32.5% 1.5%
Additional Rate 38.1% 39.35% 38.1% 1.5%

Although this will make it more expensive to employ people, the £4000 a year Employment Allowance will ensure businesses with only a few employees do not have to pay any extra Employers National Insurance. 

 

Minimum Wage/ National Living Wage (new rates from April 2022)

National Living Wage (Age 23+) £9.50
National Minimum Wage (Age 21-22) £9.18
National Minimum Wage (Age 18-20) £6.83
National Minimum Wage (Under 18) £4.81
Apprenticeship Rate £4.81

 

Other Changes

Annual Investment Allowance £1 million limit extended to April 2023 This means you can get immediate tax relief in year of up to £1m for spending on capital investment e.g. new machinery.
Corporation Tax Remains at 19%  But increases from April 2023 for businesses with profits over £50,000
Recovery Loan Scheme Extended to 30th June 2022 Loans of up to £2m available to businesses
British Business Bank Regional Funding £1.6bn extra  To provide debt and equity finance for small businesses and expand the Regional Angels programme (which provides equity finance to small businesses in the regions).
Start Up Loans More funding Allow up to 33,000 entrepreneurs to get loans to start or grow their business
Apprenticeships £3000 apprenticeship incentive extended The £3000 you get for hiring an apprentice (which ended in September) has now been extended to 31st January 2022. 
Capital Gains Tax Payment Window Extended to 60 days The deadline to report and pay tax on sales of residential property that you rent out will rise from 30 days after sale to 60 days.
Research & Development Tax Relief Now includes Cloud Computing and Data  A lot was announced in the previous budget for R&D tax relief but the relief has now been expanded to include research and development in cloud computing and data which will help IT companies. From April 2023 it will be reformed to only allow R&D tax relief for research and development carried out in the UK.
Business Rates System will be retained and reformed After a review of the system, the government have decided to keep the current business rates system and reform it, including revaluations every 3 years 
Business Rates Business Rates Multiplier Frozen This means all business rate payers will not pay as much business rates over the next few years.
Business Rates  Business Rates Improvement Relief If you make improvements to your business property from 2023, there will be no increase in Business Rates from that for 12 months. From 2023 there will also be exemptions for onsite renewable energy generation too.
Retail, Hospitality and Leisure Tax Reliefs 50% Business Rates relief for 2022-23 Businesses in retail, hospitality and leisure industries will see a 50% cut in their business rates for 1 year (up to £110,000) from April 2022. Currently it’s at 66% relief until March 2022.

The Reduced VAT rate of 12.5% will rise back to 20% in April 2022.

Alcohol Duties Reforms to duties The system will be simplified so that higher strength alcohol will have increased duties and lower strength alcohol will see a cut in duties. There will also be a lower rate on draught alcohol to encourage people to buy from pubs instead.
Air Passenger Duty Cut for domestic flights and increased for very long haul flights Flying within the UK will see a cut to the Air Passenger duty making them cheaper, but a long haul flight over 5,500 miles e.g. flying to Australia will see an increase from £87 to £91 in duty. 
Fuel Duty Planned rise scrapped The planned rise in fuel duty on petrol/diesel will be scrapped
Cultural institutions Tax reliefs of up to 50% for many cultural institutions This includes theatres, galleries and museums over the next two years. The Chancellor also announced a range of new grants available for improvements and renovations to museums. 
Vehicle Tax Vehicle Tax Rise  Vehicle Tax Rise will rise for most vehicles but the tax for large HGV vehicles will be frozen.
Pensions Rise to 57 The age at which you can take an early Pension or remove money from your Pension is rising from 55 to 57 (from 2028).
Capital Gains Tax Allowance frozen The Capital Gains Tax allowance is frozen at £12,300 a year.
Accounting Periods Sole Trader accounting periods will change Currently sole traders can end their financial year at any point and the tax will be calculated on that period. From April 2024, sole traders will instead be taxed on their earnings in each tax year regardless of when their accounting year ends. 
Online Sales Tax Consultation The government is consulting on introducing an online sales tax of 1-2% in order to level the playing field with businesses who have to pay business rates for physical locations.

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