Business taxes are rising. Here's your next step

29th September 2021

Over the past few weeks, I’ve been talking about how hard it’s becoming to attract and retain staff in certain industries.

  • Staff shortages are putting employees in a position of power - It’s an employees’ market right now across multiple sectors.

  • Salaries are being driven up, making it more expensive to hire the people you want

  • Other companies are poaching good people because they’re desperate

  • Lots of people have delayed switching job through the worst of the pandemic, but now they’re ready to move - making it more likely you’ll lose good people at a bad time.

And now, like a bolt out of the blue, it’s all just become even harder.

Earlier this month, the government announced a 1.25% increase in national insurance payments, to help fund the NHS and social care.

Let’s spell out what that means.

As of April, each employee will cost you more!

If your team is large, that could be a significant hike in your payroll expenses that will impact your bottom line and perhaps influence future hiring decisions.

All your employees are getting a tax hike, too. In a few months’ time, they’ll be doing the same work - for less money.

In an atmosphere where people are already rethinking their employment options, that could affect their considerations.

Finally, dividend tax rates on shares will also increase by 1.25% in April. So if you pay yourself in dividends, your personal tax bill is about to go up too.

Wait, did I say “finally”? Just kidding.

Furlough finishes at the end of this month, so if you still have employees on that scheme, your payroll expenses are about to shoot right up - unless you make those employees redundant.

(And no, it’s unlikely that an influx of employees coming off furlough will solve the country’s staffing issues. They won’t necessarily be in the industries where shortages are acute, or have the skills we’re missing - there’s a potential mismatch.)

Plus, HMRC has made it clear that from October 1, they’re going to get stricter about debt collection. So if your company owes the government money, you better be prepared to pay up soon.

And finally - this time for real! - we already know there’s going to be a rise in corporation tax in 2023. It sounds like a long time ahead but it’s already on the horizon, and will add greatly to your tax burden.

That’s quite an exhausting list, isn’t it. All in all, there’s a lot of pressure mounting on businesses financially in the near and distance future.

The government has decided to take away some of your profits, and you have very little control over it.

And the employment market is about to get even more unstable and unpredictable - again potentially affecting your profitability and the smooth functioning of your company.

There’s really only one thing to be done... And it’s the same thing you always hear from me. You MUST understand your figures properly and use them to plan ahead financially...

So you can make any adjustments necessary to maintain your profitability, even as your expenses rise...

Ensure you can afford the staff you need and pay yourself properly... And foresee whether these tax rises might cause you financial trouble in the future - and put in place a plan to nip any problems in the bud.

You cannot do this based on gut instinct, without a clear view of your numbers.

So if your accountant isn’t providing you with frequent management accounts and cashflow forecasts (and helping you understand them!), you’re not getting the information you need to manage this situation.

And if they’re simply sending you your accounts at the end of the financial year, that’s too late.

You need help planning forward - not (just) looking backwards.

That’s exactly what we do with our clients. We work with them closely to make sure they understand their exact financial situation - and help them make financially astute decisions for the future.

If that’s the kind of help you’d like with your business, get in touch by calling today on 01279 647 447. I’ll get right back to you.

Don’t be complacent. A smallish tax rise can be the difference between profit and loss - so act now.

Warmly,

Garry

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