Will Farmer FMAAT 
January 22, 2022

Budget 2021 - Update for Limited Company Directors

On Wednesday 27th October 2021 Chancellor Rishi Sunak set out the governments tax and spending plans for the upcoming 2022/2023 financial year.


Here are the latest updates to be aware of for limited company directors;


- Dividend Tax and National Insurance to increase by 1.25% from April 2022 to fund a new "health and social care levy." Dividend Tax will therefore increase from 7.5% to 8.75% at the basic rate (earnings above £14,570), from 32.5% to 33.75% at the higher rate (earnings above £52,270) and from 38.1% to 39.35% at the top rate (earnings above £150,000). The £2,000 tax free dividend allowance remains in place.


- Employers National Insurance will also increase from April 2022 by 1.25% from 13.8% to 15.05% at the basic rate. This is the tax paid by companies on employees earnings above £8,840 per year.


- As set out in the March 2021 budget Corporation Tax will increase from its current rate of 19% of profits to 25% of profits, this will take place in April 2023. Corporation Tax on profits below £50,000 will remain at 19%.


- To partially offset the planned Corporation Tax increase the government has announced Corporation Tax "super deductions" of 130% that can be claimed on qualifying capital allowances. You can read more about this in our article.


- The reduced 12.5% rate of VAT for hospitality businesses will revert to 20% in April 2022.


- The minimum wage will increase to £9.50 per hour from April 2022 for employees aged 23 and over, it will rise to £9.18 per hour for 21-22 year olds, £6.83 per hour for 18-20 year olds and £4.81 for under 18s. The apprentice rate will also increase from April to £4.81 per hour.


- It was widely anticipated that the government would announce a reform of business rates, but this has been delayed.