Autumn Budget 2021: What it means for your business money

Cheaper flights and pints made the headlines after Rishi Sunak’s Autumn budget 2021, but now that the media dust has settled what does the budget really mean for business owners? Read on and let us break down each point and what we think are your next steps.

Autumn Budget 2021: What it means for your business money

Autumn Budget 2021 highlights for businesses

Rishi Sunak released his autumn budget summary on the 27th of October and a few days later, now that we have all had a few days to digest this we wanted to break down what his budget and spending review actually means for you as a business owner. So that you can be clear on your next steps.

We are focusing on the business and VAT issues in this article.

Relief as business rates in England get a lift

The Government has committed to:

  • Freezing business rates multipliers (between 1 April 2022 and 31 March 2023), to 49.9p for small businesses and 51.2p for larger businesses. This means for every £1 of rateable value, you are required to pay either 49.9p or 51.2p as business rates to your local Council. This freeze should benefit all businesses and in particular, those hit hardest by the Pandemic. 
  • Introducing a temporary business rates relief for eligible businesses in retail, hospitality, and leisure for 2022/23. Eligible business properties will gain a 50% rates relief, subject to a cap of up to £110,000 per business. 
  • Introducing a 100% improvement relief for business rates. The relief will take effect in 2023 and the Government will consult and instruct on how best to implement this new scheme in the coming months. It will mean that occupiers eligible for improvements to their properties could claim as much as 12 months of relief from higher bills where improvements to an existing property increase the rateable value. 
  • Exempt business rates (from 1 April 2023 until 31 March 2035) for eligible plant and machinery used in onsite renewable energy generation and storage. 100% relief if eligible heat networks will also be put in place to support the decarbonisation of non-domestic buildings. 
  • Increasing the frequency of business rates revaluations so they take place every three years instead of every five, starting in 2023. 
  • Providing an extended transitional relief fund for smaller and medium-sized businesses for one more year. This will restrict landlord property rental increases to 15% for small properties (up to a rateable value of £20,000 or £28,000 in Greater London) and 25% for medium properties (up to a rateable value of £100,000). These will be subject to subsidy control.

Here are our thoughts and your next steps
Whilst there is limited relief for all in this budget 2021 summary and some much-deserved relief for those acutely impacted by Covid closures, there are some points to think about. As business owners and leaders, we have to acknowledge that the way we carry out our business has changed dramatically in the last twenty months. Remote working and now hybrid working has become more of the norm for many of us. It is reasonable from a cost point of view, therefore, to take some time to evaluate how, or if our business properties still serve us. As we have seen with some of our clients, some rental properties are now surplus to requirements for the way they now operate post-Covid.

There are also environmental impact questions where we do still need offices or business premises. How much change we are able to make is now being rewarded in certain sectors to help the Government achieve its climate pledge. We think all businesses could take this further and seek funding where necessary to lessen their footprints now.

Corporation tax will rise for some in 2023

The Chancellor confirmed that the rate of Corporation tax will rise to 25% from April 2023, where businesses with profits above £50,000 (smaller businesses remaining at 19%). There will be marginal relief, subject to detailed rules and certain exclusions, for those who profit between £50,000 and £250,000 per annum.

Here are our thoughts and your next steps
Simply put, we believe you need to start building in increases to your pricing models and decreasing costs, so that you can set aside the correct amounts as we reach April 2023. Planning now means that you won’t hit new rates of tax and be left short. Through your marketing, your customers will have time to adjust as you make your new RRP transition if you remember to focus on value.

An increase to Employers' National Insurance contributions (NICs)

A new 1.25% health and social care levy for 2022/23 only, means that employers’ class 1 NICs will increase by 1.25% from 13.8% to 15.05%. In April 2023 the levy will remain in place for any employees above the state pensionable age, whereas all other NIC contributions will return to their 2021/22 level. To help manage this increase an employers’ class 1 NIC secondary threshold has been increased from £8,840 to £9,100 per year from 2022/23.

Here are our thoughts and your next steps
Whilst we all appreciate the increase will benefit our NHS, which this is squarely pointed at after Covid, our main concern is that those steady workers above the pensionable age may incur the brunt of the continued increase from April 2023 and many sadly maybe let go. Our advice would be to consider looking at your workforce pledge and where you do rely on many who are reaching or already over the pensionable age, that you consider how you can balance your cash flow to maintain their employment.

An extension for annual investment allowances

There has been a temporary £1m annual investment allowance for some time now. This will reduce back down to £200,000 on 1 January 2022 and will extend until 31 March 2023 (so that £200,000 until 31 March 2023).

Here are our thoughts and your next steps
Many businesses needed extra investment during the Pandemic to either reach their market by new means, work with new safety measures, or pivot entirely. Hopefully, for many of you, that period of investment has come to a natural close by this point. It is prudent therefore to relook at any plans for major investment due in the next year and only precede where it is vital for your business. It may be possible to break down investment over a longer period of time and stage your expenditure.

Autumn Budget 2021 What it means for your business money

Company car, or van tax and fuel benefits

In 2020 company car tax rates were frozen until 2022/23. This has now been extended to 2024/25. The company car fuel benefit multiplier will increase in line with the Consumer Prices Index (CPI) rate of inflation from £24,600 to £25,300 (roughly 2.85%).

If you own a company van, then the van benefit charge and van fuel benefit charges will both increase in line with CPI, from 6 April 2022. Your van benefit charge will also increase, from £3,500 to £3,600 and the van fuel benefit charge will rise from £669 to £688.

Here are our thoughts and your next steps
While rises aren’t as extreme as they could have been here, particularly given the Government’s need to move on climate change, there is room to ask if you need the same fleet of business vehicles as you did previously. Are, or will your workforce go back to using them as they did pre-Covid?

If you are a sole trader and still in need of your vehicle, then balancing costs and pricing would be your best step forward.

A new tax - Residential property developers' tax

Rishi Sunak confirmed the Government’s plans to introduce a new tax from April 2022 on the profits that companies and corporate groups derive from UK residential property development. The tax will be charged at 4% on profits exceeding an annual allowance of £25 million.

Here are our thoughts and your next steps
For those of you who have enjoyed working small scale in this area without the full complexities of taxation, you may be relieved to hear that there is an annual allowance of £25 million. However, as your brand grows and your in-work portfolio increases each year you will need to consider tidying up your cashflow practices so that you have enough set aside for a 4% tax when you reach the threshold.

Changes to research and development (R&D) relief

R&D tax relief reforms will take effect from April 2023, which will expand qualifying R&D expenditure to include data and cloud costs. This change will also target abuse of the relief provision, by improving compliance and refocusing support towards UK innovation. Full details are yet to be released.

Here are our thoughts and your next steps
R&D has been a hot topic for some time and tax reforms were always coming. We do not yet know the full extent of how this will affect your use of the tax relief. If you’d like our tips as this information goes live, please subscribe to our mailing list.

3.1% rise in annual tax on enveloped dwellings (ATED)

From 1 April 2022, the ATED annual charges will rise by 3.1%. While there are multiple ATED bands, the lowest ATED charge will increase from £3,700 to £3,800 and the highest from £237,400 to £244,750.

Here are our thoughts and your next steps
First introduced in 2013, this tax was created to combat the corporate buy-to-let market to allow more opportunities for first-time buyers. It is not surprising therefore that this tax is still rising. Rises will ultimately be reflected in your rental pricing and it may be a good time to revisit supplier costs to counterbalance some of this hike.

6% rise in diverted profits tax

From April 2023, the rate of diverted profits tax will increase from 25% to 31%.

Here are our thoughts
Understandably we need to get our country’s taxation and reporting in order and so it is no surprise that HMRC taxation has increased. The rules generally do not apply to small and medium-sized businesses (SMEs), but it is worth paying attention to this change. 

Abolition of cross-border group relief, now we have left the EU

The legislation that permits UK companies to claim group relief for losses in the European Economic Area (EEA) is to be abolished. The measure also amends the legislation that limits the amount in losses that an EEA resident company trading in the UK through a UK permanent establishment can surrender as group relief. This aligns us with other countries in the world and comes into practice for accounting periods ending on or after 27 October 2021 (transitional agreements may be sought for accounting dates that straddle that period).

Here are our thoughts
As we left the EU and our lawful entanglement unravels we should expect to see more instances of law change when it comes to taxation.

Cultural relief increases

From 27 October 2021, the rates of corporation tax relief that are collectively known as the ‘cultural reliefs’ will be increased to 45% or 50% for the theatre tax relief, 50% for the orchestra tax relief, and 45% or 50% for the museums and galleries exhibition tax relief. Other rates will return to their current levels from 1 April 2023 to 1 April 2024.

The tax relief available for qualifying companies in the museum and gallery sectors has been extended to 31 March 2024.

Here are our thoughts
One of the hardest-hit industry niches has been our culture sector. Seeing relief for this area is to be applauded.

Autumn Budget 2021 What it means for your business money

New - Corporate re-domiciliation

The Government intends to make it possible for companies to move their domicile and make relocation easier. 

Here are our thoughts
This is to allow you as a person or a business entity to relocate the business headquarters to another state of jurisdiction in which you now reside. No details have been released yet. If you’d like our tips as this information goes live, please subscribe to our mailing list.

A boost for the second-hand motor vehicle industry

This is a new scheme that allows businesses that buy second-hand vehicles from Great Britain to sell in Northern Ireland or the EU to recover an amount equivalent to the VAT that could be included in the vehicle’s purchase price.

This should mean that Northern Irish dealers account for a comparable amount of VAT to the amount dealers in Great Britain (who can still use the second-hand margin scheme) would account for on a similar sale.

Here are our thoughts
A boost to the second-hand car vehicle business here in the UK is a welcome scheme. This will allow our sellers to compete and build a more sustainable outlook, particularly where the UK market may have dipped in recent months.

Introduction of VAT rules in free zones

The most significant change to free zones is a new VAT charge for goods exiting the free zone and entering into free circulation within the UK.

The exit charge will not apply if a subsequent zero-rated supply is made within the free zone, or if a taxable supply is made within three months of entering free circulation.

VAT also becomes due if free zone customs procedure rules are breached. The legislation will differentiate the free zones from other warehousing regimes, and amend some of the existing legislation so that it is compatible with the VAT rules.

Here are our thoughts
Encouraging economic activity has long been a priority for increasing manufacturing in the surrounding areas of free ports and since the 1980s we have had a number of sites here in the UK. In 2021 Rishi Sunak created eight more. However, these sites have long been seen as tax havens for foreign companies, or smuggler routes to the UK market. Introducing VAT is intended to combat that.

New VAT exemption for the importation of dental prostheses

Currently, dental prostheses supplied by registered dentists, dental technicians, or other care professionals are VAT exempt. This will be extended to include the importation of prostheses and will include imports to all of the UK, including Northern Ireland.

A consultation on fund management fees

VAT treatment of fund management fees will be consulted upon by the Government. No details have been released yet. If you’d like our tips as this information goes live, please subscribe to our mailing list.

New VAT sanctions: a points-based system for failure to submit

The Budget documentation reminds taxpayers of the new points-based penalty system as of 1 April 2022, as announced in the Spring Budget 2021.

Here are our thoughts and your next steps
It is crucial that you start remitting your VAT submissions on time to avoid penalties and fines. If you are struggling to get this done, then please reach out, as we have a team of experts who can help you.

VAT registration thresholds remain the same

VAT registration and deregistration thresholds will remain unchanged until 31 March 2024. This amount is £85,000.

Here are our thoughts and your next steps
As Making Tax Digital is a requirement for VAT submissions, we would urge those of you reaching the threshold to contact us for a free discovery call, where we can arrange a time and service to show you how Xero works and help implement it for you. Xero is an accurate and easy-to-use accounting software, which will take the headache out of submitting your taxes.

Autumn Budget 2021 What it means for your business money

Final thoughts

Our aim with this article was to give you a rundown of the Autumn budget for 2021 and summarise it in a way that makes it a bit more clear in terms of your next steps as a business owner. As you can see whilst there are areas of increase and new taxation, by enlarge this budget is geared towards recovery and getting us spending again as an economy.

Changes will mean revisiting your financial planning and budgeting. If you’d like some help with planning for 2022 in particular, join our mailing list where we are going to be releasing our next video on this very subject!