Autumn 2021 Budget Update
Posted on 4th November 2021
The Chancellor, Rishi Sunak, unveiled the Autumn 2021 Budget on Wednesday 27 October. Very few surprises as most of the key points were announced (leaked) via the press over the previous week. Here we summarise the key points affecting contractors, small businesses and landlords.
For Small Limited Company Owners
For small limited company owners there are 2 key impacts (if you are also an employer, there are further impacts for you below):-
1. Corporation Tax increase (previously announced in Spring Budget 2021).
The Corporation Tax Rate will rise from the current rate of 19% to 25% from April 2023. This sounds like a significant leap - but Rishi has cushioned this by introducing a Small Profits Rate that will keep the Corporation Tax Rate at 19% for businesses with profits up to £50,000.
For businesses with profits between £50,000 - £250,000 the rate will incrementally increase between 19% and 25%.
2. Dividend Tax rate increase (announced in September 2021 and now confirmed, with the introduction of the Health and Social Care Levy).
Dividend rates will increase from April 2022:
Basic Rate - currently 7.5%, will increase to 8.75%
Higher Rate - currently 32.5%, will increase to 33.75%
Additional Rate - currently 38.1%, will increase to 39.35%
This will mean higher personal tax liabilities for directors/shareholders of limited companies.
As always, we will provide a full tax planning recommendation to our clients in February/March next year, but feel free to get in touch if you have any queries about this.
In addition to the above, Employers are facing the following 2 impacts:-
3. National Insurance rate increase (again, announced in September 2021 and now confirmed, with the introduction of the Health and Social Care Levy).
National Insurance Contributions will increase by 1.25% from April 2022. These will reduce back down again in April 2023 and will be replaced by the new Health and Social Care Levy.
4. National Living Wage increase
From April 2022, the National Living Wage will increase from £8.91 to £9.50 an hour. This coupled with the increase in National Insurance Contributions (above) could substantially increase wage costs.
If you have any questions on the above, and want to look at the financial impact of this on your business, please get in touch.
Other announcements that may affect contractors, small businesses and landlords:-
Business Rates Reform
A new temporary Business Rates Relief in England for eligible retail, hospitality and leisure properties for 2022/23 will enable over 90% of these eligible businesses to receive a minimum of 50% off their business rates bills.
Business Rates multiplier is also being frozen for 2022/23.
A new Business Rates Relief will apply from 2023 to support investment in property improvements.
R&D Tax Credits Reform
Qualifying expenditure will now included data and cloud computing costs
Later in 2021 further announcements will be made to improve compliance and tackle abuse of the R&D tax credit system
In the future (no fixed date), there will be the introduction of a restriction to only allow claims for activities taking place in the UK
Annual Investment Allowance
The Annual Investment allowance was temporarily raised to £1m per year, has been extended to 31 March 2023. It will then return to the £200,000 limit.
As a reminder, the Super Deduction continues until 31 March 2023 aswell.
Capital Gains Tax
The deadline for reporting CGT on property sales has been extended from 30 days to 60 days (for property sales after 27 October).
As always, if you want to discuss how any of the announcements impact you, or your business, please get in touch.
Tagged as: Budget & Tax Rates, For - Contractors, For - Employers, For - Limited Companies, For - Property Owners & Landlords, For - Self-Employed
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