On Wednesday the 27th of October the Chancellor presented the second Budget for the year, setting out the Government’s tax and spending plans for the next three financial years.
Here is a summary of some of the changes that may affect your business:
From April 2023, corporation tax on profits over £250,000 will increase to 25%, while the rate for small profits under £50,000 will remain at 19%. There will be tapered relief for businesses that have profits between £50,000 and £250,000 to ensure that their average rate remains lower than the main rate.
The Diverted Profits Tax rate will also increase to 31%.
There are several changes for business rates, including:
- The business rates multiplier being frozen from 1 April 2022 to March 2023.
- Introduction of a temporary business rate reduction of 50% for eligible businesses in retail, hospitality and leisure, up to a maximum of £110,000 per business cap.
- Introduction of 100% improvement relief – this will provide 12 months’ relief from higher bills for occupiers, where improvements to an existing property increases the rateable value.
- Extension of transitional relief for SME’s and the small business scheme, for an additional year.
- An increase in the frequency of business rates revaluations from every 5 years to every 3 years, commencing in 2023.
- Capital Allowances Annual Investment Allowance
The Annual Investment Allowance of £1 million will be extended until the 31st of March 2023.
Health and Social Care Levy
As announced previously, a new Health and Social Care Levy will be introduced from April 2022. This 1.25% levy will be applied UK-wide to all National Insurance contributors that fall under Class 1 (Employee, Employer) and Class 4 (Self-Employed), as well as to the main and additional rates.
The Levy will also apply to the earnings of working individuals that are above State Pension age.
National Living Wage
From 1 April 2022, the National Living Wage will rise by 6.6%, to £9.50 per hour for individuals aged 23 and over.
R&D Tax Relief Schemes
R&D tax reliefs will be extended to include data and cloud costs and will be amended to ensure that efforts are focused on not only encouraging investment in UK-based R&D, but also improve compliance and reduce abuse.
*This is not an exhaustive list of all changes proposed by the Chancellor. To watch the full Budget Statement please visit https://www.parliament.uk/business/news/2021/october-2021/chancellor-unveils-autumn-budget-and-spending-review-2021/