Autumn Budget 2021: highlights for businesses
Kirsty Davey, Partner and Head of Corporate and Commercial at Coodes Solicitors, outlines six of the key points for businesses from the 2021 Autumn Budget.
Now that the dust has settled, it’s a good time to reflect on the main points in the Autumn Budget announcement. While many of the most notable announcements had been publicised ahead of the Chancellor’s speech on 27 October, there were a few items that businesses will want to take note of.
1. Rise in corporation tax
Most businesses will pay a higher rate of corporation tax but not until April 2023. In his speech, Rishi Sunak announced the increase from 19% to 25%. Our clients also need to be aware of forthcoming revisions to the small profits rate and marginal relief.
2. Tax changes for sole traders and partnerships
To coincide with the making tax digital exercise, businesses operating as sole traders and partners will be taxed on an ‘actual’ basis.
This means they will be taxed in accordance with the tax year on their profits, from 6 April to 5 April each year. The change will not take effect until 2024/5. However, we strongly recommend that our clients with a different year end take advice from their accountant early so they are ready.
3. A discount to business rates
The Chancellor announced a boost for the high street with a 50% discount on business rates for retail, hospitality and leisure businesses. This will be welcome news to many of our clients.
In the 2022-23 financial year, businesses will be able to claim a 50% reduction up to a cap of £110,000 per business.
4. Tax reliefs for businesses investing in machinery
Some of our clients may be able to claim Capital Allowance Relief for new qualifying plant and machinery. The Chancellor also announced an extension of the £1million cap for the Annual Investment Allowance for expenditure on machinery until 31 March 2023.
5. An increase to dividend tax
Rishi Sunak confirmed a 1.25% increase to dividend tax from 6 April 2022 to help tackle the social care crisis. It is advisable for shareholders to review their remuneration policy with their advisers.
6. Increase to the National Living Wage
The Chancellor confirmed an increase to the National Living Wage and National Minimum Wage. While a rise was expected, the 6.6% increase that was confirmed in the announcement was perhaps higher than most people predicted.
From 1 April 2022, the living wage will increase from £8.91 an hour to £9.50 an hour for workers aged 23 and over. For those aged 21 and 22, the minimum wage will rise from £8.36 to £9.13 an hour, while apprentices will receive £4.81 an hour, up from £4.30.
Employers must ensure they start to pay the new rates for the National Living Wage and National Minimum Wage from 1 April 2022. Employment specialist Philip Sayers discusses this in more detail here.
Our clients should get advice from their accountant or tax advisor to ensure they are prepared for these changes.