It can’t have gone unnoticed that over the past 18 months the current government have spent unprecedented amounts of taxpayers’ money funding a multitude of schemes to help minimise the impact of the global pandemic on the UK economy. We all knew that there would come a day when that spending (funded by mass borrowing) would need to be repaid. Today on 27th October 2021 the Chancellor of the Exchequer, Rishi Sunak, announced his Autumn Budget to parliament, and it would appear that pay day is here. No matter what your political views, unfortunately the results do not make for pleasant reading if you are a small business owner. In this article I will lay out exactly what the announcements mean to you as a small business owner so that you can start making your plans for change now.
PERSONAL TAXES
National Insurance
A new “health and social care levy” will be implemented from April 2022 as follows:
- From April 2022 all working age employees, the self-employed, and employers will pay 1.25% more in national insurance.
- From April 2023 the health and social care levy of 1.25% will be formally separated from the standard national insurance contributions and will also apply to those individuals who are working above state pension age.
Class 1 employees’ national insurance contributions
| Current rate | From April 2022 | From April 2023 | |
| Working age employees in the basic rate band | 12% | 13.25% | 13.25% |
| Working age employees in the higher rate band | 2% | 3.25% | 3.25% |
| Employees working above state pension age | 0% | 0% | 1.25% |
Class 1 employers’ national insurance contributions
| Current rate | From April 2022 | |
| All employees | 13.8% | 15.05% |
Class 4 self-employed national insurance contributions
| Current rate | From April 2022 | |
| Self-employed individuals in the basic rate band | 9% | 10.25% |
| Self-employed individuals in the higher rate band | 2% | 3.25% |
This levy will not apply to class 2 or class 3 national insurance contributions.
This new levy will be implemented to fund health and social care across the whole of the UK.
Dividend Tax
The tax you pay on your company dividends will increase with effect from 6 April 2022 by 1.25%
This means that you will now pay 8.75% in the basic rate band (as opposed to the 7.5% you currently pay), and 33.75% in the higher rate band (increased from the 32.5% currently payable).
LIMITED COMPANY TAXES
Annual Investment Allowance
The temporary annual investment allowance of £1m will be extended to 31 March 2023, which is great news for businesses looking to invest in more equipment.
Business Rates
A plan for business rates reform was set out to include rate reliefs for businesses that make improvements to their property that increase the rateable value, as well as giving a temporary 50% discount on 2022/23 rates to businesses in the retail, leisure and hospitality industries. This will be welcomed by the industry who have undoubtedly been hit the hardest by the global pandemic.
Alcohol Tax Reform
Pub landlords will be pleased to hear that a reform to alcohol tax will see a relief given to draft beers and ciders, as well as drinks with a lower alcohol content being taxed less than they are currently (specifically fruit ciders and prosecco).
National Living Wage
With effect from April 2022 the national living wage will increase from £8.91 to £9.50. Although this is great news for the employees, it won’t be welcomed by many small business owners. Such a large incremental increase is bound to cause cashflow problems, so this is definitely something that needs to be planned for properly.
CONCLUSION
Although this budget did lay out a variety of government schemes to help invest in the future innovation of our UK economy, it would appear that the people taking the brunt of the repayments are small business owners. Increased costs of employing people, coupled with increased costs to withdraw dividends, may have people wondering whether their businesses are financially viable anymore. Let’s see if these dramatic increases to small business costs will result in higher charges for their goods or services.
Contact Us
We endeavour to update this information as and when it becomes available to us, but in the meantime if you do need any accounting or taxation help then please don’t hesitate to contact us on [email protected] or 01634 540340.
