November Newsletter

November 2021

Surprise announcements from Budget Day

On 27 October 2021, the Chancellor delivered his third Budget in conjunction with the Public Spending Review. Many of the spending announcements had already been leaked to the press prior to Budget Day. The Chancellor did, however, manage to keep a few surprises back.

National living wage increased to £9.50 an hour

Among the announcements leaked before Budget Day was an increase in the hourly rate for the National Living Wage (NLW) which was greater than inflation for those aged 23 or over, to £9.50 an hour. For an employee working a 35-hour week that would mean £17,290 a year. With the 1.25% increase in employers NIC to 15.05% on earnings over £9,100 a year would mean £1,233 on top, the cost to the employer would be £18,523 a year before pension costs.

Pension tax relief unchanged

The Chancellor said that pension tax relief would remain unchanged. There was speculation that the Chancellor would restrict the tax relief for saving into a pension to basic rate only. Thankfully, that has not happened (yet) and the key limits are unchanged. The annual pension input limit for most taxpayers remains at £40,000 which covers both individual and employer contributions. The lifetime pension allowance which dictates the size of the individual’s fund has been frozen at £1,073,100.

New residential developer tax

From 1 April 2022, The Government will introduce a new residential developer tax on company profits derived from larger UK residential property developers. The tax will be charged at 4% on profits exceeding an annual allowance of £25million and will be included in the corporation tax returns of those companies liable to the new tax.

More time to report and pay CGT on residential property disposal

Many were expecting big changes to Capital Gains Tax (CGT) in the Autumn Budget, particularly as the Office of Tax Simplification (OTS) had suggested that CGT rates should be aligned with income tax rates. The Government have, however, taken on board the OTS recommendation that the 30 day reporting and payment deadline should be increased to 60 days. This will be a welcome change for property owners and their tax agents and will affect residential property disposals completed after 27 October 2021. Entrepreneurs will be relieved that CGT Business Asset Disposal Relief continues resulting in a 10% CGT rate on the first £1 million of lifetime gains.

Business rates to be made fairer and 50% discount for the retail and hospitality sector

In order to support businesses and jobs in the retail, hospitality and leisure sectors, the Chancellor announced a 50% discount in business rates up to £110,000. He also promised there would be a fairer system for Business Rates as a whole by providing new reliefs for investment and improvements to business premises.

Some National Insurance thresholds are changing

Lastly, the 1.25% increase in the rate of National Insurance Contributions (NICs) paid by workers and employers announced on 7 September to provide extra funds for Health and Social care will go ahead from 6 April 2022. This will become a new Health and Social Care Levy from 2023/24 onwards. Although the income tax personal allowance and thresholds are frozen until 2025/26, certain NIC thresholds have been increased In line with inflation.

For 2022/23, employees and the self-employed will start paying NICs at £9,880 and pay at 10.25% (self-employed) and 13.25% (employees) up to £50,270. Note that the Upper Limit is frozen in line with the income tax higher rate threshold and that the new 3.25% rate will apply to earnings or self-employed profits in excess of £50,270. Employer contributions at 15.05% will apply to earnings in excess of £9,100 a year for 2022/23.

 

Fletcher Thompson Team News

Due to our continued growth, we are delighted to announce the newest member of our team, Accounts Apprentice, Chloe Lake. Chloe studied business at college and was keen to progress her learning and transferable skills into the World of Accountancy!

Chloe grew up on the outskirts of Newmarket, she has a border terrier named Alfie. Her favourite film is The Notebook and she enjoys going to the gym. We are really excited for Chloe to have joined us and she is a much welcomed addition to the team, especially mid tax season!

 

Increasing prices – how can you raise your prices without losing too many customers?

The current business environment is incredibly competitive but as we emerge from the pandemic, consumer demand is increasing and many sectors have seen labour and material costs rise. As demand increases and levels of supply fall, businesses have an opportunity to increase their prices.

Have your key competitors increased their prices recently? If so, your customers will be more amenable to the change. However if you are the only firm pushing your prices up, you will need to offer something unique in order to justify it.

Tell your customers what you are doing. Avoid language like “updated price” or “adjustments to our pricing model.” Just be honest and authentic – after all, customers want to buy products and services from businesses that are open and honest. You don’t have to go into detail about profit margins or unit costs. Simply share the basic information.

Don’t apologise for increasing your prices - this will just invite your customers to negotiate. Focus on the benefits that the customer gets from buying your product or service. Maybe you offer something faster, better or with unique features?

Some price-sensitive customers may choose to go to another supplier but any new customers will be more profitable as those new customers may be willing and able to pay a higher price for a better-quality product or service.

If you receive feedback that some customers are now looking around for a cheaper alternative, maybe you could introduce a new lower tier of product or service, which has less features but at a more competitive price. For example, your top tier customers might get a dedicated account manager, 24/7 service and support, etc.

The lower priced product may cut out the account manager and support may be available only 5 days per week but the price could be 25% lower. That way you end up making more money from your premium customers but you don’t lose your more budget conscious clients to your competitors.

 

Christmas Post

As Christmas Day is now only 46 days away, it is a great time to start choosing cards and gifts for loved ones and friends. Royal Mail have provided the following postage dates and advised the general public to allow plenty of time for posting, particularly for international deliveries: 

Friday 17 December 2021 – Royal Mail Bulk Mail Economy

Saturday 18 December 2021 – 2nd Class, 2nd Class Signed For, Royal Mail 48

Tuesday 21 December 2021 – 1st Class, 1st Class Signed For, Royal Mail 24, Royal Mail Tracked 48

Wednesday 22 December 2021 – Royal Mail Tracked 24

Thursday 23 December 2021 – Special Delivery Guaranteed

  

DIARY OF MAIN TAX EVENTS

NOVEMBER / DECEMBER 2021

Date

What’s Due

19/11/21

PAYE & NIC deductions, and CIS return and tax, for month to 5/11/21 (due 22/11 if you pay electronically)

1/12/21

Corporation tax for year to 28/02/2021 unless quarterly instalments apply

19/12/21

PAYE & NIC deductions, and CIS return and tax, for month to 5/12/21 (due 22/12 if you pay electronically)

 

30/12/21

Deadline for filing 2020/21 tax return online in order to request that HMRC collect outstanding tax via the 2021/22 PAYE code