Following the Autumn Budget 2021 that was announced at the end of October, we have highlighted key points that are essential for small business owners. Carry on reading to ensure you’re up to date with the latest information on tax, business rates and more…
Annual Investment Allowance
The existing Annual Investment Allowance stands at £1m and was due to reduce to £200,000 on January 1st 2022, this will now be pushed back to April 1st 2023. Business owners thinking about high-value investments will now have more time to consider their timings of capital acquisitions – this would include such assets as larger vehicles for moving purposes, machines for business purposes, some fixtures such as air-con and integral building features such as heating and electrical systems.
Recovery Loan Scheme Extension
The Recovery Loan Scheme was due to expire at the end of December 2021, this deadline has now been extended to the 30th of June 2022. However it is important to note some changes to the scheme that will come in to play as of the 1st of January 2022:
- The scheme will only be open to small and medium sized enterprises
- The maximum amount of finance available will be £2 million per business
- The guarantee coverage that the government will provide to lenders will be reduced to 70%
Basis Period (sole trader or partnerships)
Currently, a business’ tax profit and loss for a tax year is calculated for the year up to their accounting date (year-end), called the “basis period”. From April 6th 2024, a company’s profit or loss with be calculated by the profit or loss made within the tax year itself, regardless of its accounting date.
This measure therefore removes the basis period and prevents any overlap relief.
No change to the 20% rate, the temporary reduced rate for hospitality (which dropped to 12.5% on October 1st 2021) is scheduled to return to 20% on 31st March 2022.
The business rates multipliers are frozen for a second year, now until 31 March 2023 – the small business multiplier is set at 49.9p and the standard multiplier at 51.2p (different rates apply in London and in Wales). The freezing of the multipliers will mean that your business rates will not increase in 2022/23.
- Eligible retail, hospitality and leisure properties will benefit from a 50% relief in their business rates for 2022/23, subject to a cap of £110,000 per business.
- A relief is also being introduced for improvements to business properties, which will delay the start date of higher business rates triggered by the improvements, for 12 months. The government are to consult on how to implement the relief, which will take effect from 2023 and will be reviewed in 2028.
- From 1 April 2023 until 31 March 2035 a targeted business rates exemption will apply for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief will be available for eligible heat networks. This is to support the decarbonisation of non-domestic buildings.
- Transitional relief for SMEs is extended for one year, which will restrict bill increases to 15% for small properties (i.e. those with a rateable value of up to £20,000 or up to £28,000 in Greater London), and to 25% for medium properties (i.e. those with a rateable value of up to £100,000).
All Tax bands for personal income are to remain the same until April 2023. Scottish rates could still be subject to change with the announcement of the Scottish Budget in December 2021.
National Living Wage
National Living Wage to increase from £8.91 to £9.50, an increase of 6.6%.
From April 2023:
- Companies with taxable profit of up to £50,000 will be taxed at 19%
- Companies with taxable profit £250,000+ will be taxed at 25%
Corporation Tax – R&D Relief
R&D tax relief literature 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, target abuse and improve compliance. These changes will be legislated in the Finance Bill 2022-23 and take effect from April 2024.
If you are a UK limited company, it would be worth talking to a member of the team at our sister company The Tax Relief People Ltd who specialise in R&D tax relief claims, to see if you are eligible.
Telephone: 0333 3055654