The recent budget announcement by Chancellor Rishi Sunak has finally given more support to those businesses that have been heavily affected by the pandemic. Speaking about the spending plans for the new year he said his plans were focused on the “post-COVID” era, and would pave the way for an “economy of higher wages, higher skills, and rising productivity”.
So how will the changes affect you and your business?
As part of the new budget, corporation tax will remain at 19% until April 2023 when it will then be increased to 25%. However, many small businesses not exceeding profits of £50,000 will be saved by a Small Profits Rate which will continue to remain at 19%.
Companies whose profits fall between the lower profit limit, set at £50,000, and the upper profits limit, set at £250,000, are able to claim marginal relief. This will provide a bridge between the small companies’ rate of 19%, applying to companies with profits of £50,000 or less, and the main rate of 25%, applying to companies with profits of £250,000 or more.
One of the key takeaways from the new budget was the announcement that in 2022/23 there will be a 50% business rates discount for those in the retail, hospitality and leisure sectors up to £110,000 per business.
There will also be a new ‘business rates improvement relief’. From 2023, firms will be able to make improvements to their property without having to pay extra business rates for 12 months.
“We’re taking steps to ease the burden of business rates and boost our high streets,” he said.
It was also announced that going forward business rate re-evaluations will take place once every three years instead of once every five years and that the government had cancelled next year’s increase in the rates multiplier saving ratepayers £4.6 billion over the next five years. This will be a huge relief for many businesses that have been heavily affected by the pandemic and gives them the security that their rates will be fixed at 50% for the next 12 months.
For those businesses looking into asset expansion – particularly in the purchase of new machinery – you will, I’m sure, be aware of the continuation of the super deduction of up to 130% of that cost deducted from your tax bill. Expenditure on assets in the special rate pool (such as integral features in buildings and certain cars) will also benefit from a 50% first-year allowance.
The continuation of this will be a huge help to those businesses who are looking to upgrade and restart in the wake of the COVID-19 pandemic.
It was announced that the 1.25% Health and Social Care Levy will be introduced from 6 April 2022 via an increase to National Insurance Contributions, before becoming a freestanding levy from 6 April 2023. From 6 April 2022, the dividend tax rates will also be increased by 1.25%. The basic rate dividend tax will increase to 8.75%, the higher rate dividend tax will increase to 33.75% and the additional rate dividend tax will increase to 39.35%.
In our recent article we go into these tax changes in more detail.
Amongst the changes, it was also announced that there would be no increases to capital gains tax and inheritance tax rates or allowances and the income tax limits and personal allowance will remain at their current level until April 2026.
We’re here every step of the way.