Business Taxation

Employment Allowance for businesses rises to £5,000

The Employment Allowance, which allows eligible businesses to reduce their employer NIC cost, will increase from £4,000 to £5,000 for the tax year to 5 April 2023.

Eligible employers are those who have secondary Class 1 National Insurance contributions (NICs), and additionally from the 2024 to 2025 tax year onwards health and social care levy liabilities of under £100,000 in the previous tax year.

As a result, businesses will be able to employ four full-time employees on the national living wage without paying employer NICs. This measure will benefit around 495,000 businesses, including around 50,000 businesses which will be taken out of paying NICs and the health and social care levy entirely.

This means that from April 2022, a total of 670,000 businesses will not pay NICs and the health and social care levy due to the employment allowance.

No changes have been made to the annual level at which employers’ NIC start to apply; namely £9,100 for most employees in the tax year to 5 April 2023.

VAT Rates in the Leisure and Hospitality Sector set to revert to 20%

No extension has been granted to the leisure and hospitality sector for use of the reduced 12.5% VAT rate on eligible supplies including food, non-alcoholic beverages and hotel and holiday accommodation. The VAT rate applied to these supplies will revert to 20% from 1 April 2022 as planned.

Research and Development (R&D) Tax Credit schemes to be enhanced

The R&D tax relief schemes for companies will be enhanced from April 2023 but we have to wait until this summer for more details.

We do know the reform is set to boost sectors where the UK is a world-leader, including artificial intelligence, robotics, manufacturing, and design.