Autumn 2021 Budget Highlights
The Autumn Budget 2021 was a bit of a mixed bag for small businesses. The biggest blows to many small traders will be the hikes in minimum wage and National Insurance (NHS Levy), which will be due to kick in from April 2022.
However, there was some good news for the leisure and hospitality sectors, as they will see rates cut for 12 months and a simpler system for alcohol duty introduced.
We’ve detailed below some of the key highlights from the budget.
Minimum Wage Increases
One of the worst kept secrets of the budget was the increase to the National Living Wage which will increase by 6.6% from £8.91 to £9.50 per hour. This is as well as a 9.8% hike in minimum wage for 21- and 22-year-olds from £8.36 to £9.18 per hour.
Whilst this will be a welcome change for many low-income households, this will inevitably put a further strain on small businesses as they will need to budget for this increased cost.
Small businesses will need to start thinking now about how much of this increase they are going to be able to pass onto their customers without having a detrimental impact on their business.
The NLW and NMW rates from 1st April 2022 are:
National Insurance/Health and Social Care Levy
From April 2022, employers, employees and the self-employed who are liable to pay National Insurance will also be affected by the new Health and Social Care Levy.
For April 2022 to March 2023, this will take the form of a 1.25% increase in the rates of Class 1, Class 1A, Class 1B and Class 4 National Insurance’s.
From April 2023, this will be split out into its own Health and Social Care Levy at the same rate of 1.25%.
For small businesses, this means the employers NIC contributions will increase from 13.8% to 15.05%.
To put that in context, detailed below are some examples of the increases in cost for a category A NIC employee
Corporation Tax Increase
Whilst on the point of tax increases, Corporation Tax is also increasing from April 2023 from 19% to 25% for businesses with profits over £250,000.
For any company whose profits are below £50,000 per annum, the 19% rate will still apply.
For companies whose profits are between £50,000 and £250,000, a tapered rate will apply so it will be somewhere between 19% and 25% depending on the level of profits.
This won’t affect every small company, but it will still be something to bear in mind.
Business Rates Changes
Some slightly better news for businesses with premises in that the Chancellor has announced that the government will be looking further into the business rates system, in order to make it fairer.
It is hoped that there will be some welcome changes coming down the line to help bricks and mortar businesses compete with online retailers.
The first tangible piece of positive news is that next year's planned increase in the business rates multiplier will be cancelled.
There will also be a green investment relief introduced to encourage businesses to adopt green technologies.
This won’t affect every small company, but it will still be something to bear in mind.
Retail, leisure, and hospitality business rates cut
Continuing the Covid-19 pandemic relief for those businesses who have been hit the hardest, there will be a 50% reduction in business rates for 12 months.
The maximum discount being £110,000.
Alcohol Duty Simplification
As part of an update to the Alcohol duty system, the number of main duty rates in use will be reduced from 15 to 6. The guiding principle being that the stronger a drink is, the higher the rate of duty.
Lower strength drinks such as rosé wine and fruit cider will see a reduction in duty rate whilst high strength drinks such as fortified wine will see an increase.
A small producers relief will be introduced which will extend the small brewers relief, to small producers of other low strength alcoholic drinks.
To help pubs, a new draught relief will be introduced. This will cut the duty paid by 5% on draught beer and cider in containers over 40 litres.
The caveat being that these changes won’t take effect until February 2023.
Fuel Duty
Finally, the planned rise in fuel duty will be cancelled meaning that tax paid on fuel will be frozen for the next five years.
This will be welcome news for any businesses who rack up quite a few miles on the road each year but will possibly shrink into insignificance given the general rising costs of fuel.
*All info is believed to be correct at time of publishing on 12/11/2021
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