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Read MoreThis month we discuss the changes to National Insurance, social care and corporation tax that were recently announced. We also discuss how these changes are going to effect business owners and the future of business.
On Tuesday, the 7th of September, Prime Minister Boris Johnson announced a 1.25% increase in National Insurance (NI) and changes to the social care system. An increase of 1.25% on share dividend earnings on those who own shares in companies was also announced. Additionally, corporation tax is set to increase in 2023 to 25% for some businesses. It’s being increased to its highest since 2012. Alongside this a super-deduction is being introduced to help the economy recover and to support businesses.
The increase in NI will create £12bn a year that will specifically go towards the health and social care sectors. The NHS will receive £6bn directly to support recovery from the pandemic. These changes will be brought into effect as of April 2022. There have also been changes to social care, with more support being directed towards subsidized health care for those with below £20,000 in assets. These changes are for England only as Scotland, Wales and Northern Ireland already have similar forms of subsidized health care.
National Insurance is also significantly less for income made above £50,000 (only 2% compared to 12% for income below this) which has led some such as the SNP to say “[this will] leave the poorest in society subsidising the wealthy”.
The changes to corporate tax are designed to help economic recovery after £299bn was borrowed from April 2020-2021 due to the pandemic. Which was the highest figure since records began (1946). The 25% corporate tax will only impact those with above £250,000 profit per annum. While those under £50,000 will pay a small profits rate (19%). Those in-between will pay somewhere between 19-25% depending on their profit.
There are some doubts about the effectiveness of the social care plan. Concerns about insufficient funding as well as a lack of planning and support for important areas of care have been raised by those in the social care sector. Issues such as: staffing shortages, care for working adults and unpaid family carers remain unsolved by the changes to social care.
The large increase in corporation tax will probably shock some companies. It may also deter some who are looking to invest in the UK. This increase abandons plans for the U.K. having the lowest corporation tax in the G20. However, the UK still has the lowest corporation tax rate in the G7.
Increased corporation tax will have little impact on small businesses. However, it may impact foreign investment and the direction of the corporation tax policies. National Insurance increases will impact everyone. However, the impact may be disproportionate for poorer, younger working people so that social and health care sectors can recover.
The severity of these impacts are unclear, and there may be changes to these decisions in the future. What is for sure is that there are going to be increased economic burdens to help economic recovery in the wake of the pandemic.We will have to observe the extent of this and other changes in the future.
For more articles like this, go to our Articles page (or click here for our previous article), and also consider signing up to our Newsletter! Check out our other articles about policies that impact business, such as our COP26 and Covid-19’s impact on office spaces articles.
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Thinking of selling your business? Join us for our workshop on October 15th from 11:00 AM to 12:30 PM to gain expert insights into the entire process. Here’s a sneak peek …
Read MoreThis month we update our take on the article ‘How COVID-19 is going to impact office spaces’, three years on from COVID-19. Published at the end of 2020, this previous …
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