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With the dust settling on the recent Budget, let’s break down the impact on business owners, writes Derbyshire-based Bev Wakefield, owner of Vibrant Accountancy.
While the Chancellor’s announcements weren’t as harsh as some feared, there are notable financial consequences.
First, changes to Employer’s National Insurance will sting. The rate increases to 15 per cent, and the starting threshold drops from £9,100 to £5,000.
Additionally, the rise in minimum wage is great for employees but may affect recruitment plans for businesses.
However, there’s a silver lining: the Employment Allowance has doubled from £5,000 to £10,500. For smaller businesses with fewer employees, this is good news.
Based on an average UK salary of £35,000, companies with up to five employees may be better off overall, while larger firms will likely feel the pinch.
Money extraction strategies also need to be reconsidered. Small salaries and dividends aren’t necessarily optimal anymore. Although rates on electric cars are increasing, they remain attractive. Speaking of vehicles, double-cab pickups are now taxed as cars, making them less tax-efficient.
Business Asset Disposal Relief is also shifting. Selling a business used to incur a 10 per cent tax, but from 2025, that will increase to 14 per cent, and 18 per cent the following year.
For a £1 million business sale, taxes will rise from £100,000 today to an additional £40,000 next April, and £80,000 more the year after.
Estate planning is affected, too. New Inheritance Tax rules mean that a £2 million business, previously tax-free when passed on, will now face a £200,000 tax liability.
Beyond finances, new digital tax rules will require quarterly reporting of personal income tax, and HMRC penalties for late payments will become stricter.
But when all’s said and done, it’s worth remembering we’re resilient as business owners. We’ve faced everything from Covid to interest rate rises. With the right support, we’ll get through this too.
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