The announcement of the Autumn Budget meant a lot of changes for small businesses and sole traders across the UK. Rishi Sunak explained how his proposal will help build the economy after the pandemic and give relief to the most affected businesses.
During the announcement, Rishi confirmed that there will be a 1.25% increase in National Insurance and no increase in income tax. And there was so much more.
Here, we’ve highlighted 13 things you should know if you’re a small business or a sole trader.
1. Business Rate Changes
Rishi announced that he would not be abolishing business rates but making the system fairer. He plans to revalue the current system more frequently and encourage businesses to be more green by offering a green investment relief. This will include things like installing solar panels.
There will also be a business rates improvement relief that will allow businesses to make property improvements without having to pay extra rates for 12 months. Both these changes will begin in 2023.
2. Retail, Leisure & Hospitality Business Rates
For the business sectors that were hit the hardest during the pandemic, there will be a 50% business rate discount. This will be for 12 months with a maximum discount of £110,000. This is assumed to begin from April 2022.
Theatre tax relief and Museums and Galleries tax relief rates will increase from 20% to 45% for non-touring productions and 25% to 50% for touring productions from 27th October 2021. From the 1st April 2023, the rates will fall to 30% and 35%, with a return to 20% and 25% on 1st April 2024. The Museums and Galleries Tax Relief will expire after 31st March 2024.
From the 27th October 2021, the relief will increase from 25% to 50%, reducing to 35% from 1st April 2023, and returning to 25% from 1st April 2024.
3. Reform of Basis Periods For Self Employed and Partners
The basis on which profits are taxed is to be changed from the account’s year ending in a tax year to the actual profits arising in a tax year. Self-employed sole traders and partners who already have a year-end at the end of the tax year will experience no change in the basis of taxation.
For affected traders with year ends other than the end of March or 5th April, there will be a transition to an actual basis during 2023-24 and the new rules will come into force from 6th April 2024. The reform will include greater flexibility on the use of overlap relief in the transition year and provisions to reduce the impact of transition profits on allowances and profits.
4. Capital Gains Tax
When it comes to CGT in the Autumn Budget, there are two changes worth mentioning:
- They’re capping the annual exempt amount. This was fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives, and some types of trusts for disabled people; and £6150 for trustees of most settlements, and
- The deadline for reporting chargeable residential property sales – not the main residence, this covers sales of second homes or buy-to-let properties – is increased from 30 days to 60 days. This change applies to disposals that are complete on or after 27 October 2021.
The second change is welcomed as the 30 days reporting window was a tight reporting timeline in which to gather all the relevant data to make a submission to HMRC and to pay any taxes due.
5. Corporation Tax Will Increase
The corporation tax will increase to 25% from April 2023. This will only apply to companies that make annual profits of more than £250,000. Also, the rate of surcharge on banking companies will be 3% and the surcharge allowance increased from £25m to £100m.
R&D tax reliefs will be reformed to support modern research methods by expanding qualifying expenditure to include data and cloud costs. This will effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK, and target abuse and improving compliance. These changes will be legislated for in the Finance Bill 2022-23 and take effect from April 2023.
6. Reliefs For Investments In Qualifying Assets
The temporary ‘Super-Deduction’ and a 50% first-year allowance – that were introduced April 2021 – will continue to apply qualifying expenditure up to 31st March 2023. The super-deduction allows businesses to remove 130% of qualifying expenditure as a deduction from taxable profits.
The Annual Investment Allowance will reduce to £200,000 from the 1st April 2023. Business owners thinking about high-value investments in qualifying assets will now have more time to consider their timing of capital acquisitions.
The ISA limits set for 2022-23 are:
- Adult ISAs the limit remains at £20,000
- Junior ISA limit remains at £9,000
- Child Trust Funds remain unchanged at £9,000
7. Van & Car Benefit Changes
For those with company vans and cars, there will be an increase on the van benefit charge and the car and van fuel benefit charges by the Consumer Price Index from 6th April 2022. The flat-rate van benefit charge will increase to £3600; the multiplier for the car fuel benefit will increase to £25,300, and the flat-rate van fuel benefit charge will increase to £688.
8. VAT Free Zone For Freeports
From 3 November 2021, the Autumn Budget will introduce new elements into the VAT-free zone model for Freeports. They are:
- implement a free zone exit charge to ensure businesses do not gain an unintended tax advantage from the zero-rate in the free zone model,
- make amendments to existing VAT law to ensure free zone rules and warehousing rules are mutually exclusive,
- amend some parts of historic free zone legislation which are incompatible with the new free zone VAT rules.
9. Increasing the normal minimum pension age
The earliest age at which pension savers can access their pensions without incurring an unauthorised payments tax charge is changing. From 6 April 2028, the normal minimum pension age is increasing from 55 years to 57 years.
10. Fuel Duty Frozen
Following the fuel shortages and panic buying, Rishi announced that there will be no rise in fuel duty. This will mean that tax paid on fuel will be frozen for the next five years which will help out those small businesses that use a lot of mileage.
11. Alcohol Duty Changes
From February 2023, there have been a few changes to alcohol duty.
Alcohol will now be taxed on how strong the drink is. This means drinks like fruit cider and beer will be taxed less whereas high strength drinks and spirits will be taxed more. The duty on sparkling wines will be cut from 28% to an equivalent duty to still wine.
However, a small producers relief will be introduced offering relief to microbrewers and small producers of low strength drinks.
There will also be a 5% draught relief will be introduced which will cut the duty on beer and cider from draught containers over 40 litres.
12. National Living Wage Increases
And finally, Rishi confirmed that the NLW will increase to £9.50 per hour (previously £8.91) from 1 April 2022. The full changes to the National Minimum Wage rates from 1 April 2022 are as follows:
- The 21 to 22-year-old rate will be £9.18 per hour
- The 18 to 20-year-old rate will be £6.83 per hour
- The 16 to 17-year-old rate will be £4.81 per hour
- The apprentice rate will be £4.81 per hour
If you have any questions about how the Autumn Budget is going to affect you personally, don’t hesitate to get in touch. Contact us and we can provide you with the most up-to-date information.