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.
National Insurance and dividend tax rise
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.
|Income tax band||Dividend tax rate 2021-22||Dividend tax rate 2022-23|
Personal Tax Allowance and directors salary.
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 by the next budget statement (March 2022), as it previously has in the past decade.
Hospitality, Retail & Leisure – Tax cuts and new schemes
Business rates cut
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.
New Alcohol Duty
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 Draught Relief scheme
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”.
Small Producer Relief (SBR)
The new scheme will provide tax relief to small brewers and distillers of beer, cider and other alcoholic drinks less than 8.5% ABV
Transport, fuel and business connectivity
- The Chancellor announced a National Infrastructure Strategy to boost connectivity between different UK regions, outside of London. Thus, cities outside of London are expected to receive extra funding to improve rail, tram and bus services.
- The Government is also going to guarantee £5.7bn in spending for better transport systems across city regions outside of the capital.
- Flights between airports in England, Scotland, Wales and Northern Ireland will be subject to a new lower rate of Air Passenger Duty from April 2023.
Fuel Tax Cancelled
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
HGV Tax rise suspended until 2023
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.
Surcharge cut on bank profits
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%.
R&D investment plan
The Government’s research and development investment will remain on target to increase to £22bn.
How did business leaders react to the latest budget?
Note - the business rates relief is capped at £110k per company so that is the maximum your rates bill can reduce. While it will benefit many smaller businesses, this will limit the impact for larger premises and multi site businesses. https://t.co/MKgRLUe6nX— Kate Nicholls (@UKHospKate) October 27, 2021
❄️🥃 Today’s freeze on spirits duty is a welcome relief for our industry, but further work is needed to ensure fairness for #ScotchWhisky distillers.— Scotch Whisky Association (@ScotchWhiskySWA) October 27, 2021
Our full statement on the #AutumnBudget from @KarenEBetts here 👉 https://t.co/5GD69FL16f pic.twitter.com/QUwwoiSTuJ