UK Budget: What is changing and how to prepare your business

National living and minimum wage rises, corporation tax increase, changes to business rates, and more!

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    The Chancellor of the Exchequer, Rishi Sunak, unveiled the Government’s future spending plans in last week’s UK Budget, revealing his plans to focus on the “post-Covid” era and work towards an “economy of higher wages, higher skills, and rising productivity”.

    His budget proposes to support the people with the cost of living and repair the UK economy from the damage taken by the pandemic.

    But what exactly will change and how will businesses be affected by what is to come?

    Continue reading for a breakdown of what was revealed in last week’s budget, how this may affect you, and how we can provide support to prepare your business for what is to come…

    National Living and Minimum Wage Rises

    From April 2022, the UK’s national living wage will rise from £8.91 an hour to £9.50. The 6.6% increase to £9.50 applies to workers aged 23 and over, giving full-time workers an extra £1,000 a year.

    Minimum wage increases from April 2022

    In anticipation of this, businesses should begin to prepare their payroll teams to manage the rise of employee’s salaries and update any related policies to notify staff of new pay rates.

    National Insurance Rates Rise

    From April 2022, National insurance Rates will rise by 1.25% which will be paid by all working adults, and those over the state pension age.

    Employees and self-employed individuals earning more than the primary threshold/lower profits limit of £9,568, will be affected by these changes.

    Affected taxpayers, particularly those in the SME and family company sectors, may choose to consider bringing forward bonus or dividend payments ahead of the changes in the NIC and tax rates, subject to commercial considerations.

    Corporation Tax Increase in 2023

    This is the first corporation tax rise in 47 years and will increase to 25% from April 2023.

    However, this will only apply to businesses whose annual profits total over £250,000. Companies whose annual profits are under £50,000 will remain paying the current corporation tax rate of 19%, although this will increase when companies near the £250,000 mark.

    SMEs who wish to make plans for the future should keep this tax rise in mind.

    Changes to Business Rates

    Rather than eradicating business rates altogether, the Government are instead working to reshape the current system to make it fairer.

    The business rates system will be revalued every three years starting in 2023, which is more frequent than the current system.

    Two investment reliefs will be introduced which will be effective from 2023. The green investment relief to encourage businesses to adopt green technology (solar panels) and a new business rates improvement relief which will allow businesses to make property improvements and pay no additional business rates for a period of 12 months.

    50% Business Rates Cut for Retail, Hospitality, and Leisure in England

    Retail, hospitality, and leisure were some of the industries hit hardest during the pandemic. Many went under or are still trying to rebuild to meet pre-COVID levels.

    To aid with this, the chancellor has announced that there will be a 50% business rates cut for these industries – with the maximum discount up to £110,000 which will be valid for 12 months.

    It has not been stated when this will be effective by, however it will likely be from April 2022.

    Alcohol Taxes Simplified

    A new system of alcohol duty taxation has been announced to make it much simpler.

    More tax will be paid for high-strength drinks, such as fortified wine and various ciders, whereas less tax will be paid on lower strength drinks such as rosé and fruit ciders.

    A new small producers’ relief will be introduced, which will extend small brewers’ relief to small producers of other low-strength alcoholic drinks, and to support pubs, a new draught relief will be introduced to cut the duty charged on beer and cider from draught containers above 40 litres by 5%.

    These will be effective from February 2023 and are permanent changes.

    If you require further advice on anything discussed above to prepare for upcoming changes, please contact us. We are here to help.

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