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Autumn Budget 2021: Impact for business owners

Rebecca Durrant, Partner and National Head of Private Clients
27/10/2021
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The Chancellor continued his support for businesses in terms of investment and innovation, however these announcements need to be measured against the increases in national insurance and dividend taxes for business owners.

A tax by stealth on national insurance contributions and dividends, the 1.25% increase will impact workers, businesses and SMEs drawing dividends. Many owner-managers will have struggled over the last 18 months as they did not qualify for COVID-19 support. The increase in National Living Wage, while welcome will put additional costs and pressure on businesses but may go some way to help the labour shortage in some of the more badly hit sectors such as care workers and hospitality.

This combined with the freezing of allowances and tax rates, will increase the income tax take. Tax from earning and spending represents around 70% of the tax revenue. Those expecting any fundamental shake up to the tax system will have to wait a while yet.

The increase in dividend tax goes some way to balancing the perceived inequality between the employed individual and the company director as this increase, combined with the increase to corporation tax, will mean that the decision to take salary, bonus or dividend will become very much a personal decision rather than the historic ‘default dividend’.

Tax accountants all over the country will be crunching numbers as we speak. See our recent article, Cash extraction for business owners for more information.

Autumn Budget 2021

What do the announcements mean for you and your organisation?

Insights

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What impact will increases to National Insurance, Corporation Tax and dividend tax rates have on business owner’s decision of how to extract profits?
We highlight in couple of scenarios considering the advantages of a group structure as part of both business and family wealth planning.
The government has announced a consultation on its proposal to simplify the rules under which profits of the self-employed are allocated to tax years.

Contact us

Rebecca Durrant
Rebecca Durrant
Partner, National Head of Private Clients
Manchester