Autumn Statement 2022 Small Business Summary

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The Autumn Statement 2022 contained a number of tax increases for small business, landlords and employees. Below is a summary of relevant changes.

National Living and Minimum Wage

The national and living wage will increase from April 2023

Age range Current hourly rate From April 2023
23 and over £9.50 £10.42
21 – 22 £9.18 £10.18
18 – 20 £6.83 £7.49
16 – 17 £4.81 £5.28

 

Tax on dividends

From April 2023 the current 0% tax dividend allowance will be halved to £1,000. This will result in additional income tax of £88 for a basic rate taxpayer, £338 more for a higher rate taxpayer and £394 more for an additional rate taxpayer.

In April 2024 it will be reduced again to £500.

Business owners with the flexibility of paying a salary/dividend mix may want to re-assess whether their strategy is still the optimum remuneration method for them.

Income Tax and NIC thresholds

The personal tax allowance has been frozen at £12,570 until April 2028. The higher rate tax threshold will remain at £50,270. Usually these thresholds increase to keep pace with inflation. Freezing the thresholds will mean most people paying more tax over the next few years. Assuming inflation of 2% per year, someone with a salary of £25K will pay around £580 more in 2027/28, while someone earning £62K will pay about £2,940 more.

The additional rate of tax, 45%, will be payable on income above £125,140 from April 2023. The threshold is currently £150K.

National Insurance

The employer’s threshold will remain at £9,100. Employer’s (secondary) NI contributions will be due at £13.8% of employee’s earnings above that level.  However, the employer’s allowance remains in place, so many employers will not need to pay the first £5,000 of secondary contributions.

Class 2 NIC, paid by self-employed people, will increase to £3.45 per week.

Capital Allowance Reduction

The tax-free capital allowance will reduce from £12,300 to £6,000 in April 2023, then become £3,000 in April 2024. This is significant for property owners planning to sell properties that are not their main residence.  It will increase tax liabilities by up to £1,764 in 2023/24 and £2,604 in 2024/25.

Corporation tax

Corporation tax will remain at 19% for companies with taxable profits below £50K.  Those with profits between £50K and £250K will pay 25%, with marginal rate relief.  Marginal rate relief provides a gradual increase in the rate of corporation tax as profits increase from £50K until the main rate of 25% is payable once profits reach £250K.

R&D tax relief

The small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%.  This is quite a significant change and means considerably less tax relief will be available for small companies.

Business rate relief

For the smallest businesses affected by reductions or changes in eligibility to small business rate relief or rural rate relief, the increase to their bills will be capped at £600 per year from 1st April 2023.

More information…

You can read the full Autumn Statement on the Treasury website.

Revising your forecasts and business plans for April 2023 would be a good idea. If you would like any assistance please get in touch.

RTI, pension auto-enrolment and minimum wage 2012

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RTI. Auto-enrolment to pension schemes.  An increase to the minimum wage.

There have been a few changes in the news recently. The important ones for employers are the changes to national minimum wage, the introduction of RTI reporting, and the introduction of automatic enrollment of workers to pension schemes.

National Minimum Wage

From 1st October 2012 the minimum wage rates are:

  • £6.19 an hour for workers aged 21 and over (an increase of 11p)
  • £4.98 an hour for workers aged 18-20
  • £3.68 an hour for workers aged below 18 who are no longer of compulsory school age
  • £2.65 per hour for apprentices under 19, and 19 or over in their first year of apprenticeship

Payroll changes – RTI

HM Revenue and Customs (HMRC) is changing the way employers report tax and national insurance (NIC) liability.  Currently, you (or your payroll provider), calculate tax and NIC on a regular basis. You pay your employees their net wage or salary. You then pay the tax and NIC to HMRC monthly or quarterly.  At the end of the tax year, a P35 report is filed with HMRC.  The P35 confirms the amounts of tax each employee has paid, and the total tax and NIC deducted and paid to HMRC by the employer.

Under the new system – RTI (real time information) employers send a report to HMRC when every payroll run is completed.   Each report will contain employees’ personal and payment details.  So there will no longer be a year-end return to file.  HMRC will no longer require P46s and P45s to be filed, but you will still need the same information from starters and must give P45 information to leavers.

To prepare for the change you’ll need to make sure your software can file RTI reports, and check that all of your employee details are accurate.  If you use a payroll provider, or bureau, they should handle the change for you.

The payroll software that we use is fully compliant with the new regime, so clients can expect to see little difference in the work they need to do.

More information is on HM Revenue and Customs website, or please contact us for help with your payroll.

Pension Auto-enrolment

The introduction of compulsory pension schemes for jobholders has been in the news recently.  Currently only large companies must make sure all eligible workers are enrolled onto a qualifying pension scheme.  It will be extended to all employers by 2017.

Employers will have to deduct a proportion of the jobholder’s pay, and make an additional employer contribution.

The dates from which employers must start (the staging date), depend on the number of employees you have and your PAYE reference.  More information what you need to do, when you’ll need to do it, and what you must not do, can be found on the Pensions Regulator website:

When the time comes to set up your scheme, please talk to an independent financial advisor to find the most cost effective scheme for you and your workers.  If you would like help in finding a good financial advisor please contact us.