Updated: Apr 5, 2022
Rishi Sunak has delivered the UK Spring Budget for 2022 on the 23rd of March. Today we have a quick rundown of how the changes will potentially impact your small business.
Why Are Things Changing?
The gov puts out a new Spring Statement when the tax year starts on 6 April each year, bringing with it new tax legislation for the UK population.
Usually, these changes are simple but due to the recent national response to the COVID-19 pandemic, this year's spring statement brings some substantial changes to UK tax law as we have to pay back the money that was borrowed for the governments pandemic response.
A quick rundown of the changes:
National Insurance tax will increase by 1.25% to cover health and social care.
Dividend taxes are increasing by %1.25 also.
A personal tax-free allowance freeze has been put in place until 2026. This 'stealth tax' means an increase in salary over the next 4 years will have larger tax obligations than usual.
With a cost of living crisis well underway and inflation rising, Rishi Sunak was expected to offer some much-needed relief to the UK taxpayers.
So what do these new tax changes mean for small businesses and the self-employed?
National Insurance Still To Increase - But The Threshold Will Change
National insurance contributions will increase by an additional 1.25% temporarily, until the health and Social care Levy comes into effect next year.
Rishi has announced that the threshold for paying National Insurance tax will be raised by £3000, equalling the threshold for the tax-free allowance sum of £12,570.
This means that self-employed and employed workers will be able to earn more before the national insurance contributions kick in.
July 2022 is the start date for these changes in which Class 1 NICs will increase from £9880 to £12,570.
Self-employed workers can benefit from these changes as well. If you fall below the small profits threshold of £6,725, you will still build up national insurance credits but Class 2 NICs will not need to be paid.
A Cut In Fuel Duties
A much-needed fuel duty cut is on the way after months of rising fuel prices. This will be great news for the milage heavy workers of the UK.
A 5p cut in the fuel duty tax will save an average of £100 over the year for a car driver. This tax cut will come into effect on 23 March 2022 and will last for 12 months.
Fuel duty is a tax on vehicle fuels that had been frozen at 57p per litre since 2011.
Energy Saving Products Tax Cut
Some good news for homeowners looking to go green will save money on solar panels and heat pumps. Homeowners installing energy-saving products will have zero VAT to pay.
The Gov's New Tax Plan
Rishi Sunak has said that he wants to reduce income tax from 20% to 19% by 2024. A surely welcome change. Only time will tell on that one though. Consider our fingers crossed.
Nothing New For Business Rates
Restaurants, hospitality and pleasure businesses will benefit from a previously announced 50% reduction in business rates, starting in April. This will replace the current 66% reduction which ends March 31.
The business rates multiplayer has been frozen for this tax year.
Alas, there have been no further announcements on business rates in this year's Spring Statement.
No VAT Changes For The Hospitality Sector
The Government previously allowed hospitality a 15% reduction in VAT which has since increased to 12.5% and will go-ahead to increase to regular levels at 20%.
Calls to maintain the reduced rate fell on deaf ears despite claims that the reduced VAT rate would allow the industry to rebuild after what has been an incredibly difficult two years for the hospitality sector.
National Insurance Changes For Employers
The chancellor has accounted that the employment allowance, which allows businesses to reduce their national insurance liabilities, will be increased to £5000 for Class 1 NIC.
The new tax plan involves looking into more flexible models for apprenticeship training. The gov also wanted to find ways to further incentivise the private sector to train their employees.
Better R&D Tax Credits Options For Small Businesses
The R&D tax credit system has been promised to be revisited and streamlined to "deliver better value for money for the taxpayer while being more generous."