Autumn Budget De-Cyphered

While there were few surprises, – the Chancellor got himself into hot water by trailing most of his announcements in the press last week- his mantra for economic and jobs growth reflects the experiences of the majority of our clients.

I would say 90% of our clients are growing, if not quicker than they were pre COVID, then certainly at that level, many have also either recently recruited or are in the process of recruiting. In terms of debt, however, a number of small business are still sat on bounce back loans, some have spent a little, some a lot, some have repaid them in full but the picture is slightly different to the overall headline.

While there was little in the budget for an accountant to get our teeth into tax-wise but there were a few things that caught my eye.

Annual Investment Allowance
This was set at £1m and due to be reduced in April 2022, but it has now been extended until March 2023 meaning that the first £1m you spend on things such as commercial vehicles, tooling and computers you still receive 100% tax relief on, or actually slightly more based on the Super Deductions announced in the March budget. This £1m applies to all businesses whether they are a corner shop or Sainsbury’s who can burn through this quite quickly but for farmers who invest annually in big plant material this is big news.

£22bn R&D investment targeted
We work with an excellent business that has sourced and secured great sums of money for clients in terms of R&D tax credits. In his speech today Chancellor Rishi Sunak set out a target of increasing spending on research and development (R&D) in the UK to more than £20bn by end of the current parliament and £22bn by 2026/27.This was said to represent a cash increase of 50% in addition to R&D tax reliefs.

He also pledged to ‘modernise’ the R&D tax credit system to ensure more money is spent in the UK, which might mean, if you’re a UK subsidiary of an overseas business, potentially you will see restrictions from 2023 on how you get R&D tax relief but hopefully this represents the first step in applying the necessary rigor to the sector to ensure spurious claims are wedeled out the R&D claims made are funding the appropriate programmes.

Business rates
Typically, business rates isn’t something we speak to clients about because we can’t affect them in any way.  You can’t, for example, reduce the cost of them by adding money to a pension scheme. The good news though is that the multiplier is not increasing next year like it was expected to and interestingly, in a move to help regenerate run down high streets, businesses that improve dilapidated old premises will not incur increased rates based on the value added by the improvements.

In addition – as a number of our clients are in the retail, leisure and hospitality sectors- they will welcome the 50% discount applied to rates next year.

Cut in beer and sparkling wine duty
Landlords and pub goers might feel like raising a glass this evening after the Chancellor announced a major cut in taxes on prosecco, rose, draught beer and cider. He also said that the 28% premium on sparkling wine will be shelved, while duty on sparkling products will be levelled at the same rate as still wine, knocking as much as 83p off each bottle of bubbly.

A planned increase in duty on spirits, whisky, wine, cider and beer will be scrapped from midnight tonight, basically making it cheaper to have a drink in a pub.

The Chancellor said he will also slash the so-called “keg tax” on barrels of beer delivered to pubs and clubs so less costs are passed on to the consumers.

In other good news for accountants of licenced premises, the chancellor announced a simplification of alcohol duties. Sadly this came a day too late for me as I spent a day filling out an alcohol duty registration form for a new microbrewery. It was the most complex tax form I have ever filled out.

National Minimum Wage
In good news for those earning the minimum wage, the chancellor has announced an increase to £9.50, but of course if you are a business owner that pays this level then you might see an impact on profits.

HUGE BOOST FOR BROWNFIELD DEVELOPMENT
In good news for the building industry, the chancellor outlined plans to build 160,000 greener homes on derelict or unused land in England with almost £2bn set to be invested, with a further £9m also pledged towards 100 urban pocket parks across the UK.

National Insurance and dividend tax hikes from April
In terms of how the Government will pay for its new spending plans, the greatest tax increases were announced last month as the Prime Minister announced a rise in both National Insurance contributions and dividend tax rates across the UK from April 2022.

Following a rise of 1.25 percentage points basic-rate payers will pay 8.75% tax on dividends, up from 7.5%, higher-rate payers will pay 33.75%, up from 32.5%, while top-rate payers will pay 39.35% up from 38.1% on dividend earnings of above £2,000 per year.

There is still time before these changes come into effect, so if you have excess reserves in your company it may be worthwhile voting additional dividends in this current year to ‘bank’ the lower tax rates.