The Autumn 2021 Budget and Your Business

The Autumn 2021 Budget update contains important information for small businesses, sole traders, and employers, which we’ve summarised here.

The Health & Social Care Levy

The new Health & Social Care Levy was first announced in September 2021 as part of the government’s intention to reform the health and social care sector. It affects:

• Class 1 (Employee) NICs
• Class 1 (Employer) NICs
• Class 4 NI (paid by self-employed people)
• The rate of dividend tax

The funding for the reforms will initially come from a temporary 1.25% increase in Class 1 (Employee and Employer), and Class 4 National Insurance Contributions.

The temporary increase will take effect from April 2022 until the following year, at which point NICs will return to normal, and the difference replaced by the new Levy.

Our infographic shows how the changes affect employers, but our guide goes into more detail about what this also means for employees and for self-employed people paying Class 4 NI.
 

An increase to dividend tax rates

The introduction of the Health & Social Care Levy will also increase the existing rate of tax on dividend income by 1.25%. The increase takes effect from April 2022.

The National Living Wage and National Minimum Wage

Having already announced the Health and Social Care Levy in an earlier release, the Chancellor’s official Budget update did have more news for employers, in the form of changes to the National Living Wage and National Minimum Wage.

The National Living Wage

The National Living Wage is payable to workers aged 23 and older. In April 2022 this will increase from £8.91 to £9.50 per hour.

The National Minimum Wage

Minimum wage is payable depending on the age of the worker. In April 2022 the NMW will increase for:

• Apprentices, from £4.30 to £4.81
• 16 and 17 year olds, from £4.62 to £4.81
• 18 to 20 year olds, from £6.56 to £6.83 per hour
• 21 to 22 year olds, from £8.36 to £9.18 per hour

Corporation Tax

The rise in Corporation Tax was announced ahead of the Autumn update, but it’s still an important one to mention for businesses. Whilst there won’t be any changes to Corporation Tax in April 2022, from the following year in April 2023, there will.

Companies with profits up to £50,000 will continue to pay Corporation Tax at 19%, with marginal relief offering a gradual increase for those falling between the two.

The £1m Annual Investment Allowance (AIA) extended

The AIA, or Annual Investment Allowance, allows you to claim the full cost of qualifying assets. It means that you can claim 100% of a qualifying assets’ value.

The allowance available in a year is usually capped at £200,000, but this was temporarily increased to £1 million worth of assets as part of the COVID economic recovery plan. Originally expected to reduce on 31 December 2021, the temporary cap will now stay in place until 31st March 2023. There isn’t a cap on the super-deduction.

Research & Development (R&D) tax relief

In an effort to overhaul the R&D tax relief system, the government are:

• Expanding on what qualifies so that it includes data and cloud computing costs
• Focusing relief on UK-based innovation

Changes to business rates

With various emergency support measures for the hospitality and leisure industries winding down, the government’s announcement of alternative support included key changes on business rates, particularly for businesses in those sectors.

It’s important to note that the Chancellor’s statement on this is in reference to businesses in England. It will be up to Scotland, Wales, and Northern Ireland to set their own rates.

• A further 50% business rates relief for retail, hospitality, and leisure properties in 2022/23. This is capped at £110,000 per business. (Scotland has already launched a similar scheme).
• A 100% relief on business rates for occupiers making improvements which increase the property’s rateable value. The 100% improvement relief launches from 2023, with a review expected in 2028.
• To encourage businesses to invest in environmental changes, there will be 100% business rate exemptions for onsite renewable energy generation and storage equipment, and for eligible heat networks.
• A freeze of the business rates multiplier, from 1 April 2022 until 31 March 2023. This means the multipliers remain at 49.9p and 51.2p.
• From 2023, revaluations of business rates will take place every three years instead of every five.

The Business Recovery Loan Scheme

First announced in the March 2021 Budget as a recovery measure to support businesses post-COVID, the Recovery Loan Scheme was originally expected to close 31st December 2021. The Chancellor used his Autumn Budget update to extend the scheme until 30th June 2022.

A reform for alcohol duty

The alcohol duty changes set out to simplify the existing tax bandings which affect the rate of tax added to alcohol. The new system will operate on the principle of stronger drinks (based on Alcohol by Volume – ABV) having a higher rate. There will be four bands, though information on what rate will apply for each is not yet available:

• 1.2% – 3.4%
• 3.5% – 8.4%
• 8.5% – 22%
• 22% and above

Small producer relief

To encourage innovation and production in smaller alcohol producers, there will be a new ‘small producer relief’ for those who make alcohol products with an ABV less than 8.5%. Further details of what this will be are expected to be released soon!

Draft beer relief for hospitality

As a further boost to the hospitality industry following the COVID close-downs, alcohol duty for draft beer and cider will reduce by 5%. This will apply on kegs of 40 litres or more.

The consultation on duty reform is ongoing, with an update expected in early 2022.

 
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