The Autumn budget included some key announcements for businesses, including corporation tax, super deductions, making tax digital, business rates and online sales taxes.
We go through the key announcements from the budget below. It includes how the budget will affect businesses, including Self-Employed and Limited Companies.
For information on how the Autumn Budget 2021 will affect individuals see Autumn Budget 2021 Personal Taxes.
Business Tax announcements in the Autumn Budget 2021
Below are the main tax announcements for Companies and the Self-employed.
The corporation tax rate is to remain at 19% for next year.
As announced earlier this year, from 1st April 2023 the corporation tax rate will increase to 25% for companies with profits over £250,000. Companies with profits under £50,000 will still pay tax at 19% rate. As a result, it will mean that profits between £50,001 and £250,000 will be taxed at an effective tax rate of 26.5%.
Use our corporation tax calculator to see how the new rates will affect your business.
From 1st April 2021 a super deduction on qualifying assets is available. The scheme is due to end in 2 years time when the corporation tax rates increase. (See above)
Businesses investing in assets can typically receive 100% tax relief. As an example, purchasing plant and machinery for £5,000 would provide tax relief of £950 (based on current tax rate of 19%).
The super deduction increases this relief to 130%. There are certain restrictions such as the assets must be new and it only applies to Limited companies. For full details on super-deduction assets see HMRC website.
NOTE: This may seem like a tax giveaway, however when you consider the future tax rate increase this was essential. Capital expenditure now would save tax at 19% but delaying 2 years would save tax at 25% or even 26.5%. Without the super-deduction, the Government would be encouraging companies to delay investment.
Making Tax Digital (MTD) is HMRCs plan to require all businesses to maintain their accounting records in a digital format.
Soletraders and landlords are expected to comply with MTD from 6th April 2024. This has been delayed from 6th April 2023.
Partnerships are expected to comply with MTD from 6th April 2025. This was previously 6th April 2024.
Limited companies will need to comply with MTD no earlier than 2026.
Soletraders and partnerships without a 31st March or 5th April accounting year end are to be taxed differently. The new tax rules will commence from 6th April 2024.
Currently a soletrader with a year end 30th June 2024 would use these profits to complete their tax return for tax year 2024/25.
The new rules will mean that the 2024/25 tax return will now include 3/12ths of the profits from year end 30th June 2024 and 9/12ths of the profits for the year end 30th June 2025.
The Government announced that they are looking into the introduction of an online sales tax.
Nothing significant has yet to be decided as it is still in the planning stage but the stated aim was to use this additional tax to fund reductions in business rates.
With the demise of the high street and the continued growth in online sales this would seem a logically step for HMRC to pursue.
DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice – read our full disclaimer