The highly anticipated Autumn Budget has quickly come and gone with some major changes to business rates and wages. During the speech, Chancellor Rishi Sunak set out much-needed plans for the post-pandemic economic recovery, but acknowledged that the crisis is far from over.
If you missed it, we’ve outlined the key announcements below:
Inflation likely to rise
Both individuals and businesses can continue to expect some challenging times ahead following the announcement of rising inflation, which reached 3.1% back in September. This is likely to rise further in the near future, with The Office for Budget Responsibility (OBR) expecting the Consumer Price Index (CPI) to average 4% over the next year.
Business rates to be discounted
Perhaps the most appealing announcement to come out of the Budget is the new business rates. Sunak has announced a generous 50% business rates discount for companies in the hospitality, retail and leisure sectors, up to a maximum of £110,000 for one year. This will apply to restaurants, pubs, hotels, music venues, cinemas, theatres and gyms and is a business tax cut worth almost £1.7 billion.
Wages to increase
The government has accepted a recommendation from economists, business groups and trade unions to increase the National Living Wage. This is set to increase by 59p (6.6%) from £8.91 to £9.50 an hour as of April 2022 and will apply to those aged 23 and over. While this is fantastic news for employees, the increase could cause serious financial difficulties for employers – particularly those that are still recovering from the economic impacts of COVID-19.
Universal Credit taper rate to reduce
In other news, Sunak has announced major changes to Universal Credit (UC). The taper rate on UC will be reduced by 8% ‘no later than 1st December 2021’, bringing it down from 63% to 55%. Other than this, not much has changed in terms of taxes. Given that there was a huge increase in Corporation Tax back in the March Budget, this should come as no surprise.
Alcohol duty system to change
We can probably all agree that the alcohol duty system – first introduced in 1643 to help pay for the Civil War – is both outdated and complex. The good news is that this is changing. In what Sunak calls the most radical simplification of alcohol duties for over 140 years, the government is going to slash the number of main duty rates from 15 to 6. The new system will be designed around a ‘common sense’ principle: the stronger the drink, the higher the rate.
VAT freeze to remain up in the air
Hospitality operators across the country were sitting at the edge of their seats anxiously waiting for Sunak to break the news about a potential VAT freeze. Unfortunately, the Chancellor made no reference to keeping the 12.5% VAT rate. As such, we can safely assume that it’ll return to the pre-pandemic level of 20% in April 2022. That is, unless the government changes its mind and takes action in the coming months…
Need further advice?
We know that the annual Budget statement can be a lot to take in – especially in the run-up to a crucial festive period. That’s why we’re here to support you through these uncertain times.
Whether you need assistance with your budgeting and forecasting or tax planning advice, we’re the team to turn to. We can also advise on any areas that impact you as an individual – at the end of the day, what affects you and your family can also have a knock-on effect on your business. Get in touch with us today to find out more.
Photo courtesy of Gov.uk