Chancellor Rishi Sunak announced the UK’s 2021 Autumn budget this week, setting out the government's tax and spending plans for the next fiscal year.
The new budget focuses on higher wages and productivity in order to tackle the ‘post-Covid’ era with an optimistic mindset.
The Autumn budget 2021 includes several initiatives that affect small and medium businesses. Here’s a closer look at some of the budget changes and how they can affect your business.
1. Increased minimum wage
The following statistics reflect the new minimum wages for different age groups:
- Apprentices: £4.81 per hour
- 16 to 17-year-olds: £4.81 per hour
- 18 to 20-year-olds: £6.83 per hour
- 21 to 22-year-olds: £9.18 per hour
The National Living Wage is set to increase by 6.6% in April 2022 for workers aged 23 and over. This means that the National Living Wage will match the real Living Wage set out by the Living Wage Foundation of £9.50. It’s up to businesses whether they choose to pay their employees this rate.
2. Lower alcohol tax
The hospitality industry will witness a change in alcohol prices as the new system proposes beverages be taxed according to their strength rather than category. Fortified wines, stronger red wines, and high-strength ciders are likely to become more expensive according to this new initiative, whilst other alcoholic drinks – such as fruit ciders and rose wine – will become cheaper.
Additionally, duty rates on cider and draught beer will be cut by 5%. These plans won’t come into effect until 2023, yet are a response to the economic downturn faced by restaurants, cafés and other hospitable businesses as a result of the pandemic.
3. Lower business rates
Business rates are paid by most non-domestic properties and comprise a huge part of a businesses taxes. Therefore, lower business rates can help shops, offices, warehouses, pubs, and other industries invest in their businesses more and focus on increasing their customer services. It’s not guaranteed that these changes will come into effect but, if they do, businesses can expect a 50% rates discount of up to £110,000 over the next year.
4. Lower Universal Credit taper rates
The government plans to cut the Universal Credit taper rate by 8%. This means that claimants who earn an extra pound will lose 55p rather than 63p. This allows claimants to keep more of the payment they earn over £515 a month and is likely to initiate an increase in consumer spending. Therefore, businesses are likely to experience an increase in profits when catering for lower-income families.
5. Air travel changes
Flights between airports in the UK will benefit from a new Air Passenger Duty rate in April 2023. This means that the tax levied at airlines for each passenger will decrease. On the other hand, long-haul flights are likely to become more expensive with a new band in Air Passenger Duty being introduced for flights over 5,500 miles.
For this reason, small travel agencies or similar businesses can expect to witness an increase in clients wanting to travel local distances or through alternative transport methods. These 2021 budget changes could also cause more consumers to consider staycations – therefore boosting opportunities for hospitality and leisure businesses.
Are you concerned as to how the budget affects you? For accountants in Melton Mowbray, contact SRB Associates today. We offer specialist advice for small and medium-sized businesses. Call 01664 503 681/682 or email [email protected]