On the 27th October Chancellor Rishi Sunak delivered the Autumn Budget for 2021, announcing the updates we can expect in the near and mid-term future. While there don’t appear to be many changes for your average small business, there were a few key updates that you will need to be aware of.
National Living & Minimum Wages
As expected, the national living wage will increase as of April 2022, and along with it the mantional minimum wage (per age bracket) will increase too:
- 23+ year olds by 6.6%, from £8.91 to £9.50 per hour
- 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
The new Health & Social Care Levy will go ahead in April 2023, aiming to pump extra funds into the NHS. For the 2022-23 tax year there will be a temporary 1.25% increase to the main, and additional rates, of Class 1, Class 1A, Class 1B and Class 4 NI contriibutions. This temporary fix will be dropped when the Health & Social Care Levy comes into force, with NI rates returning to their 2021-22 tax year levels, and the additional 1.25% being applied to the NI rates.
Those over state pension age will not be affected by the temporary rate increase for 2022-23, but will be subject to the 1.25% increase from 2023 onwards.
Another update to National Insurance, not announced, but included in the detailed documents is that some NI income thresholds are rising by 3.1% (in line with inflation) which will be welcome news to many.
Capital Gains Tax
Capital Gains Tax, or CGT, has been a hot topic recently. The Government cleverly, and quietly, brought in a 30-day deadline to pay CGT following the sale of an asset. This came under intense criticism, as many of the situations resulting in CGT – selling a property, divorce, etc… – are a long and drawn out process, for which a deadline of 30 days to pay CGT is completely inappropriate.
Following industry recommendations, the deadline to pay CGT for a UK property sale is now 60 days, effective immediately (Please note, your main home is exempt from CGT, it applies to second homes/properties). So while this is an improvement, it is only an improvement with regards to property sale… the fact that a 30-day deadline is challenging for other situations resulting in CGT being owed have been overlooked. Now we have one set of rules for one type of sale, and another for everything else.
The CGT annual exempt amount has remained the same at £12,300 and will be frozen until 2026.
The previously announced changes to Corporation Tax will be going ahead. Corporation Tax will increase from 19% – 25% but only for companies whose profits are £250,000+ per annum.
If your annual profits are under £50,000 your corporation tax rate will remain at 19%. For companies with profits over £50,000 there will be a tapering of the corporation tax rate all the way up to profits of £250,000+. Only businesses with annual profits over £250,000 will pay the full 25% rate.
Tapering is equivalent to a marginal tax rate of 26.5% on profits between £50,000 and £250,000.
Close Investment Holding Companies will pay 25% irrespective of their profit level.
For hospitality and leisure businesses badly affected by the Covid-19 pandemic, the Chancellor announced a 50% discount in business rates up to a maximum of £110,000. For all other businesses there will not be an increase, as planned, for 2022.
A new ‘Business Rates Improvement Relief’ will see businesses able to make improvements to their properties and not pay the increased rates for a full 12 month period. This is to become available in 2023.
Online Sales Tax?
This point has been raised many times, that online-only businesses benefit from not having to pay the typical business rates that bricks and mortar businesses do – particularly in the retail sphere. While an online sales tax has not been announced, there were hints in this Budget that it is in the works.
Business Recovery Loan Scheme
The business Recovery Loan Scheme introduced during the pandemic will be extended to the 30th June 2022. This scheme offers finance up to a maximum of £2 million. Originally there was a government guarantee of 80%, this will now be reduced to 70% – businesses are responsible for 100% of the repayments.