How will the Autumn Budget 2021 affect your business?
The Chancellor, Rishi Sunak, has laid out plans for the UK economy in his first ‘post-Covid’ Budget.
Although the UK isn’t completely out of the woods where the pandemic is concerned, any remaining government-backed financial support is coming to end soon and Sunak has said we must now start "the work of preparing for a new economy" post-Covid.
2021 Budget breakdown for business owners
Here’s all you need to know about the Budget will affect your business.
National Insurance Contributions
As outlined in September, National Insurance Contributions (NICs) will increase by 1.25 pence in the pound from April 2022. This means that, as an employer, you will pay NICs at a rate of 15.05% (up from 13.80%) for all employees that earn more than £8,840 per year (excluding those aged 21 or under and apprentices aged 25 or under).
The increase will only last for the 2022/23 tax year when contributions will drop back to their current levels and a social care tax will be introduced. This means that for the 2022/23 and 2023/24 tax year, National insurance rates will be as below:
|Employee main rate/higher rate||Employer rate||Self-employed main rate/higher rate|
|2022/23 NIC rates||13.25%/3.25%||15.05%||10.25%/3.25%|
|2023/24 NIC rates||12.00%/2.00%||13.80%||9.00%/2.00%|
|2023/24 Social Care Tax rates||1.25%||1.25%||1.25%|
|Charged on all annual earnings/profits above:||£9,568||£8,840||£9,568|
Here’s a breakdown of how much more you’ll need to pay in employer NICs from next year:
- £139 a year extra for employees earning £20,000 a year
- £264 a year extra for employees earning £30,000 a year
- £514 a year extra for employees earning £50,000 a year
- £889 a year extra for employees earning £80,000 a year
- £1,139 a year extra for employees earning £100,000 a year
And here’s how much extra your employees will need to pay in NICs from next year:
- £130 a year extra for employees earning £20,000 a year
- £255 a year extra for employees earning £30,000 a year
- £505 a year extra for employees earning £50,000 a year
- £880 a year extra for employees earning £80,000 a year
- £1,130 a year extra for employees earning £100,000 a year
Employees earning £9,564 a year or less do not need to pay National Insurance Contributions.
If you’re self-employed, run your own businesses as a sole trader or in a partnership, your Class 4 NICs will go up by 1.25% (from 9% to 10.25%) on annual profits from £9,569 to £50,270. Any profits over £50,270 will pay NICs at a rate of 3.25% (a 1.25% increase on the current rates of 2.00%).
The National Living Wage will increase from April 1, 2022. This means employees must now earn a minimum of:
- £9.50 per hour for employees aged 23 and over
- £9.18 per hour for employees aged 21-22
- £6.83 per hour for employees aged 18-20
- £4.81 per hour for employees aged under 18
- £4.81 per hour for apprentices
The Chancellor also announced the pay freeze on public sector workers will be lifted from April 2022.
There has been no reversal of the cancellation of the Universal Credit uplift, but the taper rate for in-work claimants will be cut from 63% to 55%. This will take effect from December 1, 2021, at the latest.
Business rates are a tax on property used for business purposes, such as offices, shops, pubs, and warehouses. Check out the government website for more information on business rates. The planned increase in the multiplier (used to work out business rates) will be cancelled in a tax cut for businesses worth £4.6 billion over the next five years.
Retail, hospitality, and leisure sectors will have a year-long 50% discount on business rates.
From 2023, every business will be able to make property improvements and for 12 months and pay no extra rates. A new green relief will be introduced to allow companies to invest in green building upgrades, such as solar panels, without adding to their business rates bills.
If your business is a limited company, you’ll be hit by a hike in corporation tax from April 2023, when the rate rises from 19% to 25%. This higher rate is payable on any profits over £250,000 made from trading and from the sale of assets or investments.
If your company has profits of £50,000 or less, you’ll pay a small profits rate (SPR) of 19%. Any profits between £50,000 and £250,000 will be charged at a higher rate of 25% from April 2023, but a marginal relief will be offered to make this an incremental increase to soften the impact.
The standard VAT rates of 20% will return from April 1, 2022. The rate was cut to 5% on July 14, 2020, then was increased to 12.5% from October 1, 2021.
Investment in business
A £1.4 billion fund will be launched to help attract more overseas investment into the UK economy along with amendments to regulations to help international companies move to the UK.
The new measures are also designed to encourage more ‘highly skilled’ foreign workers to the UK.
A £3 billion investment in skills training and education to create more opportunities for 16 to 19-year-olds in sectors such as AI, cybersecurity, and nuclear.
The Chancellor said of the scheme: “This £3 billion skills revolution builds on our Plan for Jobs and will spread opportunity across the UK by transforming post-16 education – giving people the skills they need to earn more and get on in life.”
To help people back into work, there will be a £500 million extension to the Plan for Jobs scheme, and the Kickstart Scheme will be extended until March 2022, with applications open until December 17, 2021. If your business hires an apprentice between now and January 31, 2022, you may be eligible for an incentive payment of up to £3,000.
The government has also updated the Help to Grow scheme to “turbocharge SME activity” by offering business owners support and advice, along with a grant of up to £5,000 to help small businesses invest in digital tech.
A £150 million “angel investors” fund will be launched to encourage the launch of more startups outside of London.
Government-backed Covid recovery support
There will be a six-month extension to the Recovery Loan Scheme, which will now be open until June 2022.
Available for businesses that have seen their ability to trade affected by the pandemic, the scheme was brought in to replace other government-backed support, including the Bounce Back Loan, CBILS, and CLBILS schemes.
Although the energy price cap will remain in place at its current level until April 2022, there are no plans to introduce a similar cap to help business owners with spiralling energy costs. In fact, the Chancellor made no mention of business energy or even the energy crisis during his budget speech.
Fuel duty and transport
The planned 2.8% increase in fuel duty has been dropped. This will be the 12th consecutive year that fuel duty has been frozen.
In order to help the haulage industry, the HGV levy has been suspended until 2023 and vehicle excise duty (VED, also known as ‘road tax’) has been frozen.
The planned increase in duty on alcohol will be cancelled.
A simplification to alcohol duty rules will mean that drinks are taxed based on strength - the stronger the drink, the higher the rate. This means low-alcohol drinks will also see a drop in duty.
Sparkling wines will pay the same duty as still wines, ending the 28% premium on sparkling wines.
Breweries that produce alcohol with a strength of no more than 8.5% abv will be eligible for small brewers relief, while draught relief will cut the duty on draught beer and cider by 5%.