So, what are the biggest headline changes that came out of the latest Budget and, more importantly, how do they impact your business?
Latest National Insurance changes
• From April 2022 the rate of National Insurance contributions will effectively increase by 1.25% for employees and employers. With the corporation tax rate set to rise to 25% from April 2023, owner-managed businesses should be thinking about how they reward employee performance and how best to return profits to shareholders. Back in 2015, for example, a dividend was always the most efficient route to extract company profits, with £1 profit translating to £0.56 in the hands of a shareholder. But from April 2023, that same £1 of profit would translate to £0.45.
What alternatives are there?
• Shareholders with property used by their companies or with significant loans into their companies should consider charging rent/interest as appropriate. The company will receive the 25% corporation tax relief whilst the shareholder will only suffer income tax on the receipt (at 45% for a higher rate taxpayer). However, shareholders will need to be aware of how their structure and rent charge is affecting eligibility for other reliefs such as Business Asset Disposal Relief.
We’ve been hearing a lot about Electric vehicles, but is this yet a viable option for businesses?
• The Government continues to incentivise the move away from petrol/diesel to electric through generous tax incentives for companies and individuals. 100% first-year tax relief remains in place for new, fully electric cars and the benefit in kind rate will only be 2% from April 2022. That means an Audi e-tron will cost a higher rate taxpayer only £480 per year!
For more information and timely advice on how we can help your business, call MHA Macintyre Hudson on 01908 662255.
An article by Nathan Sutcliffe