Autumn 2021 Budget: what does it mean for your small business?

The Autumn Budget 2021 was announced on 27 October 2021, but what does it mean for your small business?

Well, for starters, most of the main announcements were leaked in the days leading up to the Budget, and some changes for 2022 onwards were announced in the Spring Budget 2021.

But let’s look at the main announcements that will affect your small business, and what we know so far.

In the coming days and weeks more detail will surface, so if there are any changes we will keep you updated:

Business Rates 50% Cut for Hospitality, Retail and Leisure

  • From April 2022 business rates will have a temporary relief of 50%
  • This applies to all hospitality, retail and leisure businesses, and includes gyms
  • The relief is capped at £110,000
  • There will be a freeze on planned business rates for all business rates for the next year

VAT for Hospitality, Retail and Leisure set to increase to 20%

  • There is no change here. The temporary rate of 12.5% VAT from 1 October 2021 was due to end on 31 March 2022.
  • From 1 April 2022 the VAT rate will revert to 20%.

Alcohol Duty cut

  • The number of alcohol duties have been cut from 15 to 6, meaning a simpler approach.
  • The stronger the drink, the higher the duty.
  • Beer and sparkling wines duty will fall.
  • There is also a lower rate for small producers.
  • More information here from The Drinks Business.

Annual Investment Allowance stays at £1m

  • This was due to reduce to £200k in January 2022.
  • It will now remain in place until March 2023.
  • In April 2023 it will reduce back to £200k.

What is the annual investment allowance?

  • This is an allowance for eligible “plant and machinery”, basically any equipment needed in your business.
  • It could be a new van, double cab pick up, or kitchen/office/factory equipment.

What does it mean?

  • In simple terms, any spend on eligible plant and machinery up to £1m is taken off your profits before working out tax.
  • So for a limited company spending £10k on a new machine, they will save £1,900 on corporation tax.

We also have the Super Deduction for limited companies, and this continues as before.

National Living Wage Rise to £9.50

  • The national living wage rise will to £9.50 from April 2022, and is currently £8.91.
  • The national minimum wage is also rising from £8.36 to £9.18.
  • More on other wage increases here.

Increase in Dividend Tax by 1.25%

This had already been announced, but will take effect from April 2022.

  • For basic rate tax this will rise from 7.5% to 8.75%
  • For higher rate tax this will rise from 32.5% to 33.75%
  • Tax on overdrawn directors’ loan accounts will also rise from 32.5% to 33.75% from April 2023.
  • Here’s our blog on the dividend tax increases.

Increase in National Insurance by 1.25%

This will also take effect from April 2022.

Employment NIC

  • Employees’ NIC will increase from 12% to 13.25%
  • Employees’ NIC on earnings above £50,284 will increase from 2% to 3.25%
  • Employers’ NIC will increase from 13.08% to 15.05%

Self Employed NIC

  • Class 4 NIC will increase from 9% to 10.25%
  • Class 4 NIC on earnings above £50,284 will increase from 2% to 3.25%
  • Class 2 NIC (previously called the stamp) stays the same at £3.05 per week
  • Check out our blog on wage and NIC increases

Recovery Loan Scheme Extended to June 2022

This is the Government backed recovery loan scheme, and was due to end 31 December 2021

  • Eligible businesses can borrow between £25,000 and £10m
  • Between £1k and £10m for invoice finance or asset finance
  • No personal guarantee for borrowings up to £250k
  • More info here from our friends at Capitalise

Income tax thresholds remain the same

  • The personal allowance remains at £12,570
  • Higher rate threshold remains at £50,270
  • (this means the basic rate threshold is £37,700 (£50,270 less £12,570)

Savings and Dividend Tax Free Rates

These will also stay the same:

  • £2,000 tax free dividends each year
  • £1,000 tax free interest each year (£500 for higher rate tax payers)

VAT Registration Thresholds stay the same

  • The registration threshold is £90,000 (as of April 2024)
  • This means that if your revenue goes over £90,000 in any rolling 12 month period, you have 30 days to register for VAT.
  • The deregistration threshold also stays the same at £88,000. (as of April 2024)

What to do now?

As with all announcements from the Government, the devil is in the detail.

Check out our blog covering all the changes happening in April 2022.

If you’d like more support with any of the guidance above, please do get in touch.

If you’d like regular updates from us, please do sign up to our newsletter.