On 27th October, Rishi Sunak presented the Budget outlining his plans for spending and taxation.
But we’re sure you know that already — our news timelines were flooded with pictures of the Chancellor of the Exchequer holding the traditional red box.
As the Budget was announced, we watched the live feeds. Afterwards, we saw the reaction of news outlets and individuals; a mixture of praise and outcry or — in some cases — a complete U-turn from one to the other.
Now that the dust has settled, we’re ready to bring you a balanced, factual and digestible summary of what the proposed Budget means for our UK retailers.
As always, we’d love to hear your thoughts on this. Drop a comment at the end of this post, or email hannah@creoate.com with your reactions.
This is one change that came completely expected, having been signposted by the government several months ago; National Insurance contributions are to rise by 1.5% in April 2022.
This affects the size of your National Insurance contribution per employee, and for any salary you take from your company (although there are NI thresholds/adjusted rates).
In a survey we sent out in September, we asked you how you felt about the proposed change. The most common response was ‘somewhat concerned’ (37%), followed by ‘not really concerned’ (29%) and ‘very concerned’ (13%). 7% aren’t concerned at all, and believe it’s the ‘right thing to do’.
This makes sense given we know a large percentage of you run your business single-handedly, or with a very small team.
While the main rate of corporation tax is going to increase in April 2022 from 19% to 25%, only businesses making more than £250,000 per year will feel this in full effect. For those with annual profits of less than £50,000, you’ll still effectively be paying 19% (the current rate) from April 2022, because of the introduction of the ‘small profits rate’ (SPR).
For those businesses making between £50,000 and £250,000 in profit per year, things are a little less clear. The government said you’ll be paying the ‘main rate reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate’.
All in all, it estimated that 70% of active companies will still continue to pay 19% corporation tax from April 2022.
Rishi Sunak announced a freeze to business rates, alongside a temporary 50% discount (up to a maximum of £110,000) starting in April 2022 (N.B. business rates only apply to businesses with a retail premises).
There’s a lot of debate as to whether this is good or bad news.
On the one hand, a 50% discount feels fairly generous — for the 34% of you who told us your business is going stronger now than before the pandemic, this will definitely be a welcome bonus.
But with retailers currently paying less than 50% of business rates (due to pandemic-related reductions), in real terms this is still an increase. Andrew Goodacre, CEO or BIRA (British Independent Retailers Association), said:
‘The rates bill for this year was reduced to 25% (of normal levels) in response to Covid. Therefore reducing rates by 50% next year is in fact a 100% increase on what businesses are actually paying. On top of everything else, this will be a challenge.’
For the 48% of you who told us your business is still feeling the negative effect of the pandemic, we’re sure you’ll agree with this.
There’s also concern about the future ‘double whammy’ effect of removing the 50% discount, plus raising the rates as a whole. Businesses will feel a double hit.
Many have been pushing for years to make the process of evaluating business rates more fair. And while the chancellor did announce that he will be making these evaluations more frequent (every three years), many feel this doesn’t go far enough.
The Shopkeepers’ Campaign, which has been pushing for fundamental reforms to the way business rates work, tweeted:
‘The pledge on more frequent revaluations is simply a reannouncement of what Philip Hammond promised on business rates in 2017. We are deeply disappointed that there is no commitment to annual revaluations so that tax bills reflect the market property values’
A welcome change, however, was Sunak’s decision to make green investments, such as solar panels and heat pumps, exempt from business rates. We know sustainability is a focus for 93% of you over the next 12 months, so this change definitely seems to align with small business priorities (although it’s worth noting that these are expensive investments that many won’t be in a position to make).
The main VAT rate had been reduced to 12.5% to support businesses throughout the pandemic, but is set to return to 20% in April 2022.
The National Minimum Wage for those over 23 (which is the same as the National Living Wage), is to be raised to £9.50 an hour — a 6.6% increase on the current level.
There are increases for younger workers, too. For 21 and 22 year olds, the minimum wage will rise to £9.18, for 18 to 20 year olds it’s £6.83, and for under-18s it’s £4.81.
We hope this post has been helpful in explaining the impact that the Budget will have on your retail business.
And now, we’d love to know how you feel about it. Are you nervous or happy about the changes? Let us know in the comments below.
Not registered with CREOATE yet? Sign up now and start shopping wholesale with us today.
Related articles:
Browse Popular Categories at CREOATE: Wholesale Jewellery | Wholesale Gifts | Wholesale Stationery | Wholesale Beauty Products | Wholesale Mugs | Wholesale Homeware | Wholesale Pet Supplies | Wholesale Gourmet Food | Wholesale Garden & Outdoor | Wholesale Baby & Kids Products
Browse Trending Collections on CREOATE: Wholesale Halloween | Wholesale Mother's Day Gifts | Wholesale Father's Day Gifts | Wholesale Valentine's Day Gifts | Wholesale Spiritual Supplies
>> View all