We’ve summarised the news in two sections: the measures that will increase your business costs and the measures that will hopefully lower them.
Measures that will increase business costs
There will be no increase in Personal Allowance, Capital Gains Tax or Inheritance Tax thresholds. This is effectively a stealth increase in income tax, as more people will fall into the higher rate tax band of 40% taxation. If you’re a director or owner of a company, then it’s worth discussing the implications with your tax adviser.
Increase in National Living wage to £9.50 from 6 April 2022 (a rise of 6.6%). If you’re an employer then this means you’ll be paying more out in salaries. There may also be more National Insurance Contributions due on the increased salary payments.
Increase in National Insurance Contributions (NIC’s) for both Employees and Employers. The Health and Social Care Levy is effectively a 1.25% increase in National Insurance Contributions. Employers will be hit twice, as they’ll pay the extra charge on their earnings and their employee’s earnings.
The dividend rate will also increase by 1.25%, with shareholders also paying towards the Health and Social Care Levy.
This means the new rates will be 8.75%, 33.75% and 39.35%. The dividend allowance will remain at £2000.
VAT in hospitality will increase from 12.5% to 20% from April 2022.
Measures that will reduce business costs
The £1 million Annual Investment Allowance will continue to apply until April 2023. This effectively means you can invest up to £1million in qualifying plant and machinery and write off the expenditure immediately when you calculate your taxable profit for the year.
There will be a 50% discount on business rates for the retail, hospitality, and leisure sectors in England in 2022-23, up to a maximum of £110,000.
Fuel duty will be frozen for another year. This means the price of fuel should stabilise and come down over the coming months – depending on the HGV driver shortage and consumer behaviour.
Other relevant measures
There will be a consultation on an online sales tax to pay for the 50% discount in Business Rates.
Universal top-up credit is to be cut from 63% to 55%, allowing working claimants of Universal Credit to keep more of their payments. (Under the current system when you are working and claiming UC; for every £1 you earn in income 63p is deducted from your UC payment. Moving forward only 55p will be deducted, meaning more money in the pocket for low-earning working families).
And finally, there’s a welcome (if not that generous) gift from the Chancellor in the run up to Christmas. There’s been a reform of duties, meaning that the price of a pint of beer with your colleagues or employees will come down by 2 or 3p.