If you would like to know more about Clever Accounts, please contact us on 0113 518 8800
Last Wednesday, Chancellor Rishi Sunak presented the next budget and financial reforms the Government intends to implement throughout this tax year and beyond. As the UK economy continues to recover from the Coronavirus pandemic, with a 5.5% GDP increase in Q2 and an expected 6.5% GDP growth this year (OBR), it is still expected to confront various domestic and global uncertainties.
In his Autumn Statement, the Chancellor presented his new fiscal approach to face both the opportunities and challenges ahead.
From a 50% business tax cut for the hospitality sector and £22bn investment in R&D, to the expected rise in National Insurance and dividend tax, the chancellor speech was a mixed bag of measures that mimic the post-covid-19 state of the economy.
In this article, we cover the most relevant measures for UK self-employed and companies.
The Government’s plan to increase NI and dividend tax was unveiled back in September this year. It was introduced to support the rising costs of health and social care in the UK.
In his statement, Mr Sunak has officially confirmed that the 1.25% hike in National Insurance and dividend contributions for workers, pensioners and company directors will take force from April 2022.
It is important to mention that your Personal Tax Allowance, i.e. the amount you can earn before paying Income Tax will remain at £12,570 for basic rate taxpayers and £50,270 for the higher rate.
However, personal tax allowance could further increase in future budget statements, as it previously has in the past decade.
From 6th April 2022, eligible companies in the retail, hospitality and leisure industries will be able to claim up to 50% discount on their business rate bills, up to a maximum of £110,000.
The current 66% tax relief for the retail and hospitality sectors will remain until the end of this 2020/21 tax year.
Mr Sunak has also announced a new structure for alcohol duty which will take effect from February 2023. The new alcohol duty introduces a simplified structure of 6 duty rates for alcoholic beverages, according to their alcoholic content (instead of the current 15 different rates).
This means, that stronger undertaxed drinks will see a small duty increase, while Rose, fruit ciders, liqueurs, lower strength beers and wines will become cheaper.
Additionally, the scheduled increase in duty on spirits, wine, cider and beer has been dropped.
The chancellor has referenced the special role of local pubs in local communities, by introducing a new lower rate duty for draught drinks will which is expected to cut duty by 5% and will apply to drinks served from draught containers over 40 litres”.
The new scheme will provide tax relief to small brewers and distillers of beer, cider and other alcoholic drinks less than 8.5% ABV
The planned rise in fuel duty will be cancelled due to the significant rise in fuel prices and the current strain on consumers.
With fuel prices at the highest level in eight years, I’m not prepared to add to the squeeze on families and small businesses – Rishi Sunak
In an effort to reduce the shortages of heavy goods drivers, HGV levy and vehicle access duty for heavy goods vehicles will be suspended until 2023.
UK banks are currently paying 19% corporation tax with an added 8% of a dedicated surcharge on their profits.
With Corporation Tax rate expected to increase to 25% from tax-year 2023/24, the bank’s bill on profits will rise to 33% (25%+8%).
In his speech, Mr Sunak announced a reduction to the bank’s surcharge from 8% to 3%, bringing their total bill to 28%.
The Government’s research and development investment will remain on target to increase to £22bn.
Sign up to Clever Accounts and get fixed fee hassle-free accounting