As with any Budget, there was a sense this autumn of the Chancellor giving with one hand and taking with the other; some businesses will certainly be happier than others.
Before we get onto the policy matters, we should be cheered by the optimistic economic outlook.
Unemployment due to the pandemic will not be anywhere near as high as the worst-case scenario, the long-term scarring from COVID-19 looks like it won’t be as severe as anticipated, and UK GDP forecasts are tipped to be more resurgent than previously thought.
Growing businesses can take confidence in this outlook as they plan for the future.
A strain on cashflow & profitability
We already knew about the temporary 1.25% rise to National Insurance contributions (NICs) for 2022 and then the longer-term health and social care levy of the same amount. And we knew of the 1.25% dividend tax rise, and the corporation tax increase kicking in from April 2023.
While none of that was announced on 27 October 2021, it’s important to understand this backdrop when assessing the impact of the Autumn Budget on your business. These tax rises will undoubtedly put a strain on both cashflow and profitability.
If your growing business employs people on or near the minimum wage, then the situation will be compounded. The national living wage, which applies to over-23s, goes up 6.6% from next April to £9.50 per hour. It also becomes more expensive to hire younger workers and apprentices.
You may find there is a rippling inflationary effect on the pay rates of those a little above the minimum wage who want to maintain their differential, while more of those younger workers will be brought into auto-enrolment.
It’s time to start factoring this whole suite of expenses into your costings for next year and beyond.
Measures you could benefit from
It is not all bad news, though.
A range of relatively niche measures were announced in the Autumn Budget that will help many up-and-coming businesses.
Have a fleet or take a lot of domestic flights?
You will win here as a planned fuel duty rise has been shelved and the air passenger duty rate on domestic flights is cut.
Operate in bricks-and-mortar retail, hospitality or leisure?
You will enjoy a 50% reduction in your business rates in 2022/23, up to £110,000 per business (England only).
More generally on business rates, there is broad satisfaction that the rent revaluation process will recur more frequently – every three years, rather than every five.
And for any business which upgrades its premises, the Chancellor promised that they will not face an increase in business rates related to the improvements for 12 months.
Want to make significant investment in new equipment and machinery?
The more generous £1 million annual investment allowance will not revert back to £200,000 at the end of this year as planned. It is extended until March 2023 to coincide with the withdrawal of the super deduction.
This gives you more time and more certainty to benefit from the valuable tax allowance.
Doing something innovative?
Qualifying innovation already makes you eligible for generous R&D tax credits, and the Chancellor announced that, from April 2023, data and cloud-computing costs can be included when calculating your tax credit – boosting its value.
Other possible relevant announcements
If you work with apprentices there is a little more time to benefit from the apprentice-hiring incentive.
The offer of this £3,000 payment has been extended to the end of January 2022, instead of drawing to a close this November.
The Government also committed more money to apprenticeship training and running an enhanced apprentice recruitment service.
For SMEs, the recovery loan scheme was extended until June 2022, albeit with some restriction on the rules.
This source of lending can be useful for managing cashflow or investing in your business as it recovers from the impact of coronavirus.
One announcement that wasn’t made was the introduction of an online sales tax. Instead, a consultation will be launched.
We can’t help but feel that this will be introduced in some guise in the not too distant future, so whatever your take on the matter, get ready for it.
We are here to advise you should you wish to talk over any issues from the Autumn Budget. Please get in touch to arrange a discussion.