Interested in what the recent Autumn Budget means for your business in the coming tax year (2022/23)?

In this article, we take a look at the Autumn Budget and what was discussed by the Chancellor on 27 October 2021, and pick out the vital nuggets for businesses.

The hot take is that, outside of a few headline changes that could have major impacts for certain businesses, this wasn’t a budget delivering earthquake changes. But despite that, it’s worth learning about what’s new, changed or stayed the same.

Many measures announced in the Spring Budget, delivered in March 2021, continue to resonate. You might be interested in taking a look at the Sage Advice coverage from that time.

Autumn Budget 2021

Two new business rate reliefs grabbed some headlines following the budget.

For 1 April 2022 to 31 March 2023, a new business rates relief of 50% can be used by eligible retail, hospitality and leisure businesses. This is capped at £110,000 per business.

From the 2023/24 tax year onwards, a 100% business rates relief will be available to eligible businesses (not just retail, hospitality and leisure). To qualify, businesses will have to have made eligible improvements. The relief rate will last for 12 months following the investment.

However, the government is still consulting around this, so expect more details in further Budget statements across 2022.

Other than this, the business rates multipliers for 2022/23 are once again frozen at 49.9p and 51.2p, respectively.

Don’t forget that the coronavirus business rates holiday for retail and leisure businesses continues.

In June 2021, the 100% discount ended but was replaced by a 66% discount until April 2022 (up to a maximum of £2m, or £105,000 if the business was permitted to open following the coronavirus lockdown that began on 5 January 2021).

What this means for your business

Once again retail, hospitality and leisure businesses receive help following the coronavirus disruption, not to mention after being impacted by other national issues such as the supply chain shortage and recruitment problems.

The government says these relief measures also have an eye on helping businesses reach a net-zero target.

The goal here is clearly to encourage such businesses to not just carry on trading but to give them space to improve and expand. As such, if you’ve been planning on making extensions or improvements to your establishment then doing so following the start of the 2023 tax year might be worth it.

Of course, you shouldn’t forget that those same improvements could mean a higher business rates bill once the relief ends. Seek expert advice where required.

Outside of a headline change in Bank Corporation Tax Surcharge for banks, no corporation tax changes were announced in this budget.

This is largely because the Chancellor already outlined major changes in the Spring budget earlier this year. These will take effect as of April 2023.

We discussed that in our Sage Advice coverage at that time, but in summary:

  • The corporation tax rate increases to 25% on profits over an upper profits threshold of £250,000.
  • Profits under £50,000 fall under a lower threshold, for which the rate remains at 19%.
  • Those businesses between the upper and lower threshold can claim marginal relief, tapering their corporate tax rate between 19 and 25% depending on turnover.

What this means for your business

Details of the tapering is not yet available, so businesses caught between the upper and lower thresholds might find it hard to financially plan for the coming years.

Hopefully, these details will be made available soon and the government’s marginal relief calculator tool will be updated.

All businesses should create financial projections as part of their everyday finances, and this will help them understand which threshold the business will fall under.

Furthermore, you should speak to an accountant or tax adviser to see what methods (if any) can be used to reduce the corporation tax bill. Outside of loss relief, there’s also relief available for research and development (R&D) costs.

R&D tax reliefs will be reformed to support modern research methods by expanding qualifying expenditure to include data and cloud costs, and refocus the relief towards innovation in the UK.

Nothing new was announced regarding VAT in the Autumn Budget, which means the following for 2022/23:

  • VAT rates and rules remain the same – 20% standard rate, 5% reduced rate, and 0% zero-rated supplies.
  • The VAT threshold of £85,000 remains the same, as does the deregistration threshold of £83,000. In fact, this remains so until the end of March 2024, as promised in the Spring Budget earlier in 2021.

A major exception to the above is the interim reduced VAT rate for tourism and hospitality. An ongoing coronavirus relief measure from the government, this has meant that since 1 October 2021 eligible businesses have been able to use a VAT rate of 12.5%.

Those using this rate will have to switch back to the standard rate of 20% as of 1 April 2022.

What this means for your business

Some businesses will no doubt sigh with relief that VAT has once again escaped attention from the Chancellor. However, others might feel disappointed that a long-rumoured reduction in the VAT standard rate hasn’t come about.

Those in the hospitality and leisure industries should prepare for a resumption of standard VAT rates in around six months. Once again, accounting software, point of sale equipment, and display signage may need to be updated in time.

While much remains the same when it comes to wages and payroll, a headline change to the National Living Wage could have an impact on certain kinds of business.

Wage rates (National Living Wage/National Minimum Wage)

Another headline measure in the Budget saw the National Living Wage (NLW) being increased beyond inflation. This is the minimum hourly rate that individuals aged 23 and over can be paid within the UK.

The minimum hourly rates for those younger, or who are apprentices, are referred to as the National Minimum Wage. These are also increasing as of the coming tax year.

The changes as of April 2022 are as follows:

  • Ages 23 and over: £9.50 (was £8.91 for 2020/21)
  • Ages 21 to 22: £9.18 (was £8.36)
  • Ages 18 to 20: £6.83 (was £6.56)
  • Under 18: £4.81 (was £4.62)
  • Apprentice: £4.81 (was £4.30)

Income tax bands and personal allowance

As outlined in the Spring Budget 2021, personal allowance and higher-rate thresholds are frozen until April 2026 at £12,570 and £50,270 respectively.

This means the income tax bands without the personal allowance remain as follows for 2022/23:

England, Wales and Northern Ireland

  • Basic (20%): £1 to £37,700
  • Higher (40%): £37,701 to £150,000
  • Additional (45%): Over £150,000

Scotland

  • Starter (19%): £1 to £2,097
  • Basic (20%): £2,098 to £12,726
  • Intermediate (21%): £12,727 to £31,092
  • Higher (41%): £31,093 to £150,000
  • Top (46%): Over £150,000

National Insurance contributions

Outside of the Upper Earnings Limit (UEL)/Upper Profits Limit (UPL), which are frozen until April 2026 as with income tax thresholds, National Insurance thresholds in 2022/23 rise by 3.1%.

This means Class 1 thresholds are as follows for 2022/23:

  • Weekly Lower Earnings Limit: £123
  • Weekly Primary Threshold: £190
  • Weekly Secondary Threshold: £175
  • Upper Earnings Limit: £967
  • Upper Secondary Threshold for under 21s: £967
  • Apprentice Upper Secondary Threshold for under 25s: £967

National Insurance Contributions (NICs) for both employer and employee rise by 1.25%, as per the already-announced Health and Social Care (HSC) Levy. Contributions are as follows for 2022/23:

  • Employer NICs: 1.25% increase in Class 1, 1A and 1B National Insurance Contribution (NIC) rates, taking them up to 15.05% (from 13.8% currently).
  • Employee NICs: 1.25% increase in Class 1 NIC rates. This takes the rate up to 13.25% for earnings below the NIC Upper Earnings Limit (from 12% currently), and to 3.25% above that limit (from 2% currently).

Remember that from 2023/24 onwards, the HSC Levy will be a separate tax within payroll and identified as such on payslips, and NICs will return to normal. However, the 1.25% contributions required from employers and employees will remain.

What the wages, NIC and income tax changes mean for your business

The increase in the minimum wages is likely to impact certain payroll within certain kinds of businesses, while at the same time payroll costs will be increasing by 1.25% due to employer NIC increases for the HSC Levy.

It’s been suggested that the minimum wage increases could help lessen the impact of the HSC Levy for workers, but this means little to businesses facing compulsory payroll cost increases.

Plan now for the April 2023 increases by reviewing your payroll. If applicable, ask managers to review staffing levels and requirements.

Remember that redundancies must be carried out in a legally compliant process, and also need to be planned for.

For those businesses that utilise vehicles, there’s a handful of notable changes coming in April 2022:

  • Company car fuel benefit multiplier: This will increase to £25,300.
  • Flat-rate van benefit charge: This will increase to £3,600 and the flat-rate van fuel benefit charge will increase to £688.
  • Company car tax: As per the announcement in Spring Budget earlier this year, this remains frozen until 2024/25.
  • Road tax: Also known as Vehicle Excise Duty (VED), this increases in line with the retail price index (RPI) as of 1 April 2022. We can expect the government to make the increases known closer the time.
  • HGV road tax: Also known as HGV VED, this is frozen for 2022/23. Additionally, the government is suspending the HGV Levy for another 12 months from August 2022.
  • Fuel duty: This is again frozen (for the 12th year).

What this means for your business

Already having a difficult time for various reasons, the haulage industry need not worry that the Autumn Budget along with earlier planned changes are adding to its woes.

Businesses can use transport in other ways might also see nothing to worry about outside of increases to keep in line with inflation.

But transport remains an area of intense focus for the government, especially in light of environmental concerns. Wise business planning should allow contingencies for such time as the government takes a harder line.

Although not part of the Autumn Budget announcement, it’s worth remembering that coronavirus relief measures continue to be available, even if many have now been wound down.

Outside of the measures detailed above – such as the ongoing temporary VAT rate for tourism and hospitality – the government announced in the Autumn Budget that the existing Coronavirus Recovery Loan Scheme is extended for applications until 30 June 2022.

However, a number of changes are implemented:

  • As of 1 January 2022, the scheme is only open for small to medium-sized businesses.
  • The value of finance is capped at £2m per business.
  • The government guarantee reduces to 70% (previously it was 80%).

What this means for your business

Businesses continue to face a rough business landscape so it will be reassuring to many that the Recovery Loan Scheme continues to offer help.

That the loans will be slightly tougher to qualify for due to the reduction in government guarantee indicates the government’s direction of travel, which is that it believes normal conditions are returning to the world of business.

However, if your business could benefit from a loan for whatever reason, the Recovery Loan Scheme should top your list of schemes to apply for.

Outside of the above topics, a further number of features of the Autumn Budget or previous government announcements for 2022/23 are worth highlighting, as follows:

  • Employment Allowance: This remains at £4,000 in 2022/23. Access to Employment Allowance is restricted to employers with an employer NICs bill below £100,000 in the previous tax year.
  • Apprenticeships incentive: From 11 January 2022, employers that hire a new apprentice with a start date from 1 October 2021 to 31 January 2022 can apply for a £3,000 payment. Note that applications close on 30 November 2021.
  • Investment allowance: The temporary £1m level of the Annual Investment Allowance has been extended to 31 March 2023. This is available to any business investing in qualifying capital allowances.
  • Property purchase: Stamp duty tax is to remain the same as the standard rates reintroduced from 1 October 2021 onwards for 2022/23.
  • Dividends tax: As per the Health & Social Care Levy announcement, the income tax on dividend tax rates increase by 1.25% from April 2022 for dividend income above the £2,000 tax-free allowance.
  • Basis period reform: The planned reform of basis periods for small businesses was confirmed in the Budget. It will take effect as of the 2024/25 tax year, meaning the 2023/24 tax period for some businesses could be extended. The basis period reform should be seen as a key modification in light of Making Tax Digital for Income Tax, due to begin in April 2024. However, it will impact a lot of businesses that are currently outside the scope of Making Tax Digital for Income Tax.

Budgets often present many opportunities for businesses, and an understanding of their detail is certainly a requirement for anybody running or operating a business.

Making adjustments sooner rather than later on the back of this can significantly ease the administrative and financial burden brought by the likes of new tax requirements.

We’d love to have a chat with you about your business management processes and how we can transform your operations. Request a callback and we’ll be in touch.