As you may have seen on social media, the Chancellor announced the new Tax Plan on 23rd March. We have broken this email down into three sections so everyone can get the information they need:
1. Quick Summary
2. Detailed breakdown
3. How do I move forward with this information?
Here's a quick overview of the key changes month by month:
- Cutting fuel duty on petrol and diesel by 5p per litre
- Cutting taxes on small businesses by up to £1,000 by raising the Employment Allowances to £5,000.
- All VAT registered businesses must submit their VAT returns digitally (previously only. for businesses above the VAT threshold - £85,000)
- Dividends (by 1.25%), National Insurance (by 1.25%), Minimum wage increase (from £8.91 to £9.50).
- VAT will be cut to 0% on purchases of energy-saving materials (originally 5%)
- Aligning the annual National Insurance Primary Threshold and Lower Profits Limit with the income tax personal allowance, making the first £12,570 of earnings tax free. No change to employers National Insurance...
- Cutting taxes on business investments by reforming Capital Allowances and R&D tax reliefs.
- Corporation Tax increase! (see increases below as it is dependent on your profit levels.
- Cutting the basic rate of income tax from 20% to 19%.
- Annual self-assessments will be replaced by quarterly online submissions - this will apply to all businesses with a turnover above £10,000
- Intention to further simplify the 1000+ tax reliefs and allowances available (we will keep you updated with this)
Detailed Summary of the above changes:
1. Corporation tax from 1st April 2023 is set to increase to:
- 25% for companies with profits over £250,000.
- 19% for companies with profits under £50,000
- Companies with profits between £50,000 and £250,000 will be taxed between 19% and 25%! This is called marginal rate relief - message us if you need tax planning in advance of this change!
2. The dividend tax rate has increased by 1.25% from April 2022;
- Basic rate from 7.5% to 8.75%
- Higher rate from 32.5% to 33.75%
- Additional rate from 38.1% to 39.35%
3. In April 2022 all 3 rates of National Insurance Contribution (NIC) will increase by 1.25%.
Then in April 2023, the 3 rates of NIC will reduce back down to their current levels and the new Health and Social Care Levy (equal to the increase in NIC) will take its place.
4. The National Minimum Wage is increasing from £8.91 to £9.50 an hour from April 2022.
There was some good news to come out of the tax update for business owners:
1. A 5p per litre cut in fuel duty for 12 months starting 23rd March - an average saving of £100 per year for the average car driver, £200 per year for the average van driver and £1500 for the average haulier.
2. Employment allowance will increase from £4,000 to £5,000 per year from April 2022. This means employers’ NIC bills will be reduced by £1,000 next tax year.
3. From July 2022 the NIC Primary Threshold will increase to be in line with the Personal Income Tax Allowance from £9,880 to £12,570. This means anyone earning less than £35,000 will less National Insurance during the year. The change is expected to save employees over £330 per year.
- VAT will be cut to 0% on purchases of energy-saving materials (a 5% saving) until 31 March 2027. This change comes in on 1st April 2022 and applies to businesses that provide and install energy-saving materials and customers who have them installed in England, Wales and Scotland.
- The qualifying expenditure for R&D tax credits will now include data, pure maths and cloud computing costs
- R&D costs incurred outside of the UK will no longer be eligible expenditure for R&D tax relief unless the R&D costs incurred overseas are still claimable provided there is a material or regulatory requirement for this work to be carried out overseas
🎉 That's a wrap, what's next?
With each tax update comes with a lot of different changes and not everything applies and sometimes important details can fall through. This is why working with construction and trade accountants you can ensure you are getting the most relevant and up to date information that benefits your business.
Having control of your bookkeeping, overdue invoices, supplier and subbies payments, VAT and even payroll is the foundation of running your construction business with an element of control and consistency so you can see what is actually happening within your business and on your jobs!
Saint Financial Group are construction and trade accountants ready to support your business allowing you to free your time and focus on growing your business with the right team around you!
Frequently asked questions
This article has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.
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