A number of our charity and small business clients have been in touch asking us to update them on the impact of the various changes from the government over the last couple of weeks.
I have been holding off writing this, but it now appears that we have some clarity about the government’s policy, although please note the information may well be updated again. We can expect further announcements on 31st October.
What’s not happening
The fiscal changes announced last month have in large part been reversed so many of the changes are back to what had been government policy in early September.
- Corporation tax will now still rise to 25% from next year (with some tapering for companies with smaller profits)
- Personal income tax cuts have been cancelled both at the standard rate and the top rate
- Alcohol duty will not be frozen
- VAT free shopping for visitors to the UK will not go ahead
What is going on with National Insurance?
The biggest remaining measure is the cancellation of the National Insurance rise of 1.25%. This means that National Insurance rates are back down to the rates that they were and is the 4th rate to be charged this year. Most payroll software is automatically updating for this, but do check. While this lowers costs for both employees and employers, it is worth making sure that everyone is aware of the changes , as we have found every time there has been a change in the National Insurance rate this year some clients and their employees have found it surprising to have a change in take home pay.
What about energy?
The government has changed their pledge to consumers so that support for energy bills will only be universal for 6 month. While this was already the case for businesses and charities the signal that energy support will be ‘targeted’ from May onwards means that I would expect that most businesses and charities will not receive help with energy costs beyond this point. If you pay your energy bill directly you should get this support automatically but you need to think ahead. If you have premises where the landlord pays your energy bill, look at your lease to see whether they can increase your rents and when, as they may wish to recoup their costs.
What to look for in the coming weeks and months
Looking ahead it’s clear that the government is now in a big hole and everyone will be affected either directly, through cuts to government spending and tax rises or indirectly through the increasing turbulence in the economy.
The high inflation we are facing should be taken into account when looking at your budgeting process and pricing decisions. Remember inflation is not universally the same, and it may affect your organisation in a different way than average.
The general economic turbulence means that you may wish to make strategic use of reserves or consider how you operate. As ever, thinking ahead can only help you make the best decisions for the future, the one thing to avoid is ignoring the situation.