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Take control of your business finances

You don’t have to spend long running a business before you realise how important cashflow is: the balance between money coming into your company and the money going out on a weekly or monthly basis.

There’s not much in commerce more likely to give you sleepless nights if it goes awry than cashflow, as it’s hard to turn around quickly. But by taking a considered approach, understanding the data and anticipating problems and opportunities early, you can regain and retain control of this dynamic – even when events go against you.

Of course, it has been a particularly difficult two years brought on by the pandemic. Uncertainty has reigned, along with major disruptions to trade, demand and staffing – albeit tempered to some extent by government support.

And just as we begin to learn to live with COVID-19 (and support is withdrawn), other challenges emerge: like rising inflation and global security concerns.

In a continuingly uncertain world, here are some practical tips to help you understand, manage and then improve your cashflow so you are in the best condition possible to face the future.

Monitoring cashflow

They say knowledge is power, and that’s certainly true when it comes to managing cashflow. It starts with simply monitoring the money going in and coming out on a regular basis – let’s say monthly, but weekly (or another period) may work better for some businesses.

You have probably already adopted some form of accounting software to aid your finance function. Such software can help with cashflow monitoring, by combining access to all your banking transactions with tools to collate, display and analyse information.

What’s coming in?

The income your company receives will depend on the nature of your business, but some of the typical sources will be:

• Sales revenue
• Money available from loans or overdrafts
• Interest on cash savings
• Investment injections
• Business grants
• Tax refunds or money from HMRC schemes

Look back over 12 months and document all these incomings for each month. Then do the same for expenditure.

What’s going out?

Again, this will differ depending on what kind of company you run, but here are some ideas to get you started:

• Staff salaries or wages
• Dividends
• Taxes
• The costs of outsourced services
• Rent
• Rates
• The costs of goods or raw materials
• Buying equipment and other assets

With incomings and outgoings recorded for each month you can get your historical net cashflow by subtracting the outgoings from the incomings, to see a positive or negative figure for each month.

This is unlikely to be a consistent figure – for example, quarterly VAT payments may distort it every three months, you may have seasonal variations in trade, you may have to make a one-off large purchase and if you are growing or declining this may show as a trend.

Forecasting cashflow

Historical data is not much good on its own, but it is a key ingredient for forecasting, which is what will help you in the months ahead.

Forecasting is a complex job and you may need the help of an accountant to do it reliably, but we can talk in simple terms to get the essence across.

You are trying to get as accurate a picture of your finances in upcoming months as possible. Armed with this you can plan for challenges and opportunities, and generally make informed business decisions. It can also give you peace of mind. Priceless!

The timeframe you choose to look at is up to you. It may be for a few months, is most often for a year, but could be for several years ahead. It depends on what is useful to you and what data you have.

Let’s take a year’s view. You are going to repeat the historical records you created, but for the next 12 months. Begin with sales data, including VAT if relevant. You may base this on the previous 12 months completely if you think that is likely, or a modified interpretation based upon any changes you are aware of – say a big new contract, or a predicted downturn.

Factor in how long it takes for you to receive payment from sales. Accounting software is really good for telling you the average length of time it takes for individual customers to pay.

With a sales forecast complete, you can add your other incomings to it, based on the past records you have created. And then add all the outgoings in the same way. As before, you can modify these, based on any deviation in the figures that you anticipate.

Indeed, a crucial part of a cashflow forecast is that it is not a static document. You keep amending it as the data changes.

Another useful thing to do with your forecast at this stage is to model different scenarios – at least: best case, worst case and most likely case.

Strategies for improvement

So far, creating your cashflow forecasts might seem like a lot of hard work, for little material benefit. But with this time invested, you can start to see the returns. You now have the knowledge and confidence to be proactive rather than reactive.

The forecasts allow you to more accurately predict what will happen:

A big new contract has been signed, significantly raising positive cashflow – You can recruit new staff with confidence to manage the workload.

A large rise in material costs (in a worst case scenario) erodes profitability – You can see how much you will need to raise prices by (or cut costs elsewhere) to compensate.

February and March are always your quietest income months by some 30% – You can make sure you have an overdraft facility in place before then to tide you over.

Good cashflow management will also focus you on speeding up the money coming into your business, and slowing down the outgoings.

For instance, tighter credit control on your customers who pay late could be transformative. Or prudently reducing certain costs (in a way that doesn’t degrade quality, operational ability or staff morale) may help you reduce your number of negative cashflow months.

It is worth exploring how technology can help you both get money in faster and/or cut costs.

The dreaded A-word, for example: Automation. Accounting software can seamlessly reconcile transactions and send out and chase invoices.

Chatbots can engage with website visitors, speeding up their purchases without any staff time used. We are not talking about making human jobs redundant: you can get your people doing higher value work for you, raising productivity and improving cashflow.

Remaining COVID-19 support funding

We earlier briefly touched upon how you can use cashflow forecasting to identify when you may need an overdraft facility in place. And, of course, the same principle applies to any funding.

In February, the Government urged businesses to check whether they were eligible for any outstanding COVID-19 support grants. They said £850 million worth of grants were still on the table.

Moreover, the coronavirus recovery loan scheme remains open to SMEs until 30 June 2022. The parameters are tighter than they once were, but it is still an attractive offer.

Further help

If you are new to everything we have described, it may seem a complicated process. That’s why we’re here to help you create, monitor and manage your cashflow forecast.

Talk to us about cashflow forecasting.

 

 

 

Tax changes kicking in from 6 April.

 By the time you’re reading this, the new tax year is either just about to start or has already started.

Some of the changes have been public knowledge for months now and some of the rises have been anxiously awaited as the country continues to face a cost-of-living squeeze.

But the Government is intent on decreasing the national deficit and inflation after over £400 billion of quantitative easing by the Bank of England and global supply chain issues.

With these changes adding to the cost of living for many families, it’s more important than ever to know what changes have been made so you can prepare.

Here are the key personal taxes and tax changes you need to know in 2022/23.

Income tax and personal allowance

In Spring Budget 2021, Chancellor Rishi Sunak announced that the income tax thresholds, including the personal allowance, would be frozen until 2026.

This means income tax and the personal allowance will remain as they were in the 2021/22 tax year:

• personal allowance (tax-free) – up to £12,570 of income
• basic rate tax (20%) – further income up to £50,270
• higher rate tax (40%) – further income up to £150,000
• additional rate tax (45%) – income above £150,000.

How much income tax you pay in each tax year depends on how much of your income is above your personal allowance and how much falls within each tax band. Income above £100,000 will also see a reduction in your personal allowance.

The Government usually increases the bands and personal allowances with inflation to account for wage growth.

But by freezing the personal allowance and thresholds for the next four years any extra income individuals get may get taxed more harshly than had income tax continued to move with inflation – critics often refer to freezes as a “stealth tax”.

The income tax freeze is expected to raise an additional £6bn.

The Scottish income tax thresholds, on the other hand, are set to rise from April 2022, although the personal allowance remains frozen.

Income tax is devolved in Scotland, which is why there are different rates and thresholds to the other UK nations.

Specifically, the thresholds for the starter, basic and intermediate bands are increasing:

	2021/22	2022/23
Starter (19%)	Over £12,570-£14,667	Over £12,570-£14,732
Basic (20%)	Over £14,667-£25,296	Over £14,732-£25,688
Intermediate (21%)	Over £25,296-£43,662	Over £25,688-£43,662
Higher (41%)	Over £43,662-£150,000	Over £43,662-£150,000
Top (46%)	Above £150,000	Above £150,000

 

National Insurance contributions

The changes to National Insurance contributions (NICs) have been well reported since the Government announced they would be charged at an extra 1.25% in September 2021 for the 2022/23 tax year.

This means earnings above the lower earnings limit and up to the upper earnings threshold of £50,270 (which has also been frozen until April 2026) will be taxed at 13.25%, up from 12%.

The rise in NICs will only be in place for 2022/23, after which point it will be replaced by a 1.25% ‘health and social care levy’ that will be included on payslips.

As the name suggests, the Government plans to use the raised funds to increase NHS and social care spending by £11.4bn, according to the Institute for Government.

The other major change to be aware of is that from 6 July, the threshold at which workers start paying NICs will rise to £12,570, in line with the personal allowance.

Dividend tax

Tax on dividends will also increase for the 2022/23 financial year by 1.25 percentage points, only this time it will not be replaced in April 2023 like NICs.

The new rates for dividend tax are as follows:

• basic rate: 8.75% (up from 7.5%)
• higher rate: 33.75% (up from 32.5%)
• additional rate: 39.35% (up from 38.1%).

The rate at which you pay tax on your dividends above your dividend allowance depends on which income tax band you are in.

The tax-free dividend allowance is remaining at £2,000, meaning only the dividends you receive over this amount will be taxed.

The dividend allowance has been just £2,000 since the 2018/19 tax year, before which point it was £5,000.

There are a number of ways to manage the rise of dividend tax, such as the use of a stocks and shares ISA, where the income is not subject to tax..

If you’re a director who pays yourself with dividends, you could alternatively consider moving more of your profits into a pension instead, which will lower your taxable income.

Inheritance tax

The inheritance tax nil rate (£325,000) and residential nil rate band (£175,000) are also both frozen for the next four years, as is the pensions lifetime allowance at £1,073,100.

With rising house prices, it’s likely a lot of estates will be caught in the inheritance tax net.

A new rule also recently kicked in for anyone that dies on or after 1 January 2022 in that you need to know about if you’re planning your estate.

Estates of someone who dies after this date can be classed as ‘excepted’ and will not require heirs to report the estate’s value – as long as there’s no inheritance tax to pay, or any other reason why the estate should be reported.

To count as an excepted estate, it must:

• have a value below the inheritance tax threshold
• be worth £650,000 or less and any unused threshold is being transferred from a spouse or civil partner who died first
• be worth less than £3 million and the deceased left everything in their estate to their surviving spouse or civil partner who lives in the UK, or to a qualifying registered UK charity
• have UK assets worth less than £150,000 and the deceased had permanently been living outside the UK when they died.

Capital gains tax

The capital gains tax allowance has also been frozen at its current amount (£12,300 a year for individuals) until 2026.

The allowance will not rise with inflation, which means that gains on the sale of a second home or shares that are not in an ISA, are more likely to face a tax charge in the future.

There is another change to capital gains tax that came into effect immediately after the Autumn Budget 2021 speech that individuals might need reminding of.

Rather than 30 days, the deadline to report and pay capital gains tax is now 60 days on UK residential property disposals that are not your main residence.

Talk to us about your tax obligations.

The British Chambers of Commerce (BCC) has revised its forecast for GDP growth in 2022, which is now expected to grow at half the rate as it did in 2021.

 GDP is now expected to grow in 2022 by 3.6%, revised down from 4.2% and compared to 7.5% growth in 2021.

 The downgrade largely reflects a deterioration in consumer confidence and weak business investment amid a cost of living crisis and rising inflation.

GDP growth will slow sharply again to 1.3% in 2023 before easing to 1.2% in 2024 due to limited activity following the cost-of-living squeeze, according to the BCC.

It also warned CPI inflation could peak at 8% in Q2 2022 and outpace wage growth – significantly higher than the Bank of England’s 6% forecast.

CPI inflation is now expected to fall back to the Bank of England’s 2% target in Q4 2024, over a year later than the previous forecast of Q2 2023.

Hannah Essex, co-executive director of the British Chambers of Commerce, said:

“Our downgraded projections for the UK economy highlight the critical challenges facing business communities and households against the backdrop of the growing uncertainty surrounding both the UK and global economy.

“Coming hot on the heels of two years of a pandemic-induced squeeze on cashflow and investment plans, it is clear the Government must do more to support UK business and the wider economy.”

Plan for the long term with us.

The Economic Affairs’ Finance Sub-Committee of the House of Lords has written to the Government, listing key recommendations on off-payroll working rules known as IR35.

IR35 legislation aims to prevent tax avoidance by workers who contract out their services through a personal limited company for tax purposes but enjoy the perks a regular employee would.

The Government changed how IR35 worked for the private sector for medium and large businesses in April 2021, putting the onus of determining a contractor’s employment status on the employer, rather than the contractor themselves.

But the extension has resulted in an increased use of “rogue” umbrella companies among workers, according to the Committee.

HMRC estimates 100,000 individuals were working through umbrella companies in 2007/08 compared to at least 500,000 in 2020/21.

The sub-committee said it was “very concerned” by the trend, as it increases the risk of workers becoming involved with umbrella companies operating tax avoidance schemes.

Lord Bridges of Headley, chair of the sub-committee, said:

“The whole point of the off-payroll reforms was to crack down on tax avoidance. Yet, as we warned the Government in our Sub-Committee’s report in 2020, it risks giving rise to a new wave of tax avoidance, as people — many of them on low incomes — end up in rogue umbrella companies.

“The Government must take action to protect workers from ‘rogue’ operators as a matter of urgency.”

The sub-committee also said the Government’s objective to achieve fairness between people cannot be restricted to tax in isolation but also apply to employment rights.

Headley said:

“The Government has said it is committed to fairness in the workplace. However, it is unfair for individuals to be treated as employees for tax purposes without having employment rights.

“Our Sub-Committee reiterates the call we made in our 2020 report for the Government to press ahead with implementing the proposals set out in the Taylor Review.”

Talk to us about IR35.

More than one million individuals completed their self-assessment tax return by the extended deadline at the end of February 2022.

 

HMRC estimates 11.3m of 12.2m of the taxpayers who had to file a self-assessment tax return for the 2020/21 tax year did so by 28 February 2022.

 

Individuals and trusts required to submit a self-assessment return must usually do so by the 31 January that comes after the tax year in question to avoid a fine.

 

However, HMRC announced in early January 2022 that no fines would be applied for tax returns that were filed past the typical deadline but were sent to them by 28 February 2022.

 

This essentially extended the self-assessment deadline by a month, which HMRC also did for individuals filing their 2019/20 self-assessment tax return in 2021.

 

Lucy Frazer, Financial Secretary to the Treasury, said:

 

“Today’s stats show how vital the extra month was in supporting the cashflows of more than a million self-employed people and businesses across the UK, helping to ensure their survival as we recover from the pandemic.”

 

Individuals who filed their return on time have until 1 April to pay their tax bill or set up a time to pay arrangement to avoid a financial penalty, although interest will still accrue from 1 February on any unpaid tax.

 

The time to pay service allows individuals and businesses to spread their payments of up to £30,000 in instalments.

 

Talk to us about your tax payment.

The Government has opened a public consultation into a new online sales tax (OST) to “rebalance” the taxation of online and in-store retail businesses.

 

The Treasury published its consultation on 25 February 2022, seeking answers from stakeholders on 40 questions about how an OST should work.

 

If implemented, the Government would use an OST to reduce the business rates of retailers with properties in England and put additional funds into the block grants of the devolved administrations.

 

Supporters of an OST say in-store retailers pay a disproportionate share of business rates, making brick-and-mortar businesses less competitive.

 

However, critics say an OST would be a misplaced tool to help high street businesses, as the convenience of online shopping may partly explain the struggles felt by in-store retailers.

Nevertheless, the Government has been focused on helping retailers with their business rates, having announced a range of relief in Autumn Budget 2021.

 

The Treasury did not flesh out any specific plans rates or thresholds, saying they must define the scope and design of an online tax first.

 

Mike Cherry, national chairman of the Federation of Small Businesses, said:

 

“Efforts to level up the tax playing field between corporates that mostly operate online, paying low business rates on out-of-town warehouses, and community small businesses, which are up against high rates on high streets, are to be encouraged.

 

“But the Government must avoid simply adding further cost pressures to small firms that have increased their online presence to keep the show on the road over lockdowns.”

 

John Cullinane, director of public policy at the Chartered Institute of Taxation welcomed the consultation “as opposed to simply going ahead with a new OST”.

 

But we would like the Government to be clearer about the objectives of the online sales tax,” he continued.

 

“Is the Government content that while evidence shows that business rates today are ultimately mostly borne by landlords, the online sales tax would be very largely borne by consumers in higher prices?”

Talk to us about business tax.

How termination payments are taxed.

We may only be three months into 2022 but plenty of big employers – both here in the UK and overseas – are making employees redundant for a myriad of reasons. 

OVO Energy is reportedly trying to control costs by cutting 1,700 jobs as gas market prices soar to record highs, Tesco is in the process of axing 1,600 jobs as part of a business remodel, and Peloton has also said it will cut about 2,800 jobs globally due to a drop in demand for its products.

In the three months to 30 November 2021, however, the UK’s redundancy rate was a record low following the end of the furlough scheme.

But the tide may now be turning and employers that are going through the same process as the likes of OVO, Tesco and Peloton should be aware of how termination payments work in 2022.

These payments are made to an employee in relation to the termination or loss of their employment, such as when you make members of staff redundant.

We’ll go through everything in layman’s terms to give you an idea of what to expect, but you might need our advice to calculate how individual packages should be paid and taxed.

Two types of termination payments

For tax purposes, there are two categories of pay that can be made after you terminate an employment contract.

The first is the general employment earnings that an employee would have received if they were still working in the notice period: outstanding salary/wages, payment in lieu of notice (PILON) if relevant, and any holiday pay for instance.

Much of this money is referred to as post-employment notice pay (PENP) and is always subject to income tax and National Insurance contributions (NICs).

Prior to 2018, there were exemptions which could appear to be rather arbitrary, coming down to how contracts were worded.

The second category is termination payments. These directly relate to the termination of employment, so they include things like compensation for loss of office.

How tax is applied

You might have a £30,000 tax-free figure in mind, and this broadly applies today. However, the rules changed in 2018 and more changes came into effect from April 2020, affecting what counts within the £30,000 allowance.

When you pay an employee you are making redundant a final termination sum, this is made up of these two categories of payment we have just outlined.

If all of the money is classed as PENP or other general earnings, such as benefits-in-kind – like keeping a company car – or accrued holiday pay, the cash value for it is all considered general earnings and taxed accordingly. No £30,000 tax exemption comes into play.

If only some of the final payment is PENP and other general earnings, then this part is taxed as general earnings.

But that leaves a further aspect of the payment which the £30,000 tax exemption can be applied against.

So, up to the next £30,000 of payment is tax-free for both PAYE and NICs purposes.

Costs about to increase

As has long been the case, any excess above this £30,000 would again become subject to income tax for the employee.

Until April 2020, that was the end of the tax liability on this part of the termination payment with no NICs liability arising. This remains the case for the employee.

Class 1A employers’ NICs are now payable on termination payments in excess of £30,000, making some redundancies far more expensive for the employer than previously. Class 1A NICs are currently due at 13.8%, rising to 15.05% from next month.

Unlike other class 1A NICs associated with taxable P11D benefits, which are payable once a year on 19 or 22 July following the tax year-end, this class 1A NICs liability will be collected through real-time information/PAYE at the time of the termination payment, resulting in additional cashflow pressure.

HMRC will usually charge late-payment interest and penalties if it is not paid promptly and correctly.

How the PENP calculation works

To calculate the PENP, the following statutory formula applies:

PENP = (monthly basic pay (BP) x unworked notice period (D)) divided by the number of days in the last pay period (P) less any payments or benefits in connection with the termination already taxed elsewhere (T).

Basic pay includes any amounts given up in salary sacrifice arrangements, but excludes benefits-in-kind, commissions and bonuses among other payments.

T includes the value of a contractual termination payment, such as a payment-in-lieu of notice (PILON), but does not include accrued holiday, termination bonuses or ‘golden handshakes’.

In practice, if you are already planning to tax the employee PILON and the value of the PENP is less than this or the same, there might be nothing else to tax.

If this is not the case, you will need to consider what other payments are being made to the employee and their tax treatment, including whether it would fall within the £30,000 exemption. This is best illustrated through an example.

Example

Bruce is notified on 15 February 2022 of your intention to make him redundant, and his last day is agreed as 28 February.

Bruce’s contract states he should receive three months’ notice. D is therefore 76 days as his contractual notice period goes up to 15 May 2022.

Bruce earns £60,000 a year in basic salary, so his monthly ‘BP’ amount will be £5,000. And his last pay period was the full month of January which was 31 days – the ‘P’. However, since D is not a whole number of months, 30.42 should be used as P.

Bruce will not be paid in lieu of notice, but you have instead agreed to pay him £24,000 as an ex-gratia lump sum, plus £10,000 for loss of notice and £2,000 in accrued holiday pay.

In total, he will receive £36,000. In order to work out how much he should be taxed on this amount, the statutory formula to work out the PENP needs to be followed.

Applying the formula gives Bruce a PENP figure of £12,491. As he has not been made any taxable payments in lieu of notice, T is zero and nothing is deducted from this figure.

The full PENP of £12,491 is therefore taxable as earnings. The £2,000 from accrued holiday pay also remains fully taxable as earnings.

The balance of £21,509 is treated as the ex-gratia payment and it is not subject to any tax as it is under £30,000.

If the numbers were different and the outstanding ex-gratia payment had been, say, £40,000, then further income tax would have been due on the excess above £30,000.

You would be liable for an additional 13.8% (15.05% from 6 April 2022) in class 1A NICs on the £10,000 excess.

Long-term planning

With the UK economy experiencing turbulence due to the effects of the pandemic and Brexit, many employers are facing difficult decisions to control costs.

The cost-of-living crisis caused by a cocktail of rising inflation and soaring energy prices also means it might be very harsh to consider cutting staff at this time.

And then there’s the 1.25% increase to all NICs rates kicking in from April 2022, which has to be factored into the equation to make redundancies this year.

That said, if you think there is a negative outlook for your business in 2022/23, it would be wise to explore your options now around making redundancies.

The pay and tax calculations involved with termination payments are complex, but we can help you with managing costs within your business.

Speak to us about termination payments.

March 2022

Changes to reform multiple dwellings relief and how stamp duty land tax is calculated on purchases of mixed-use properties could be in the pipeline.

A 12-week consultation closed last month, after HMRC sought feedback on proposals to crack down on abuse by restricting homeowners from obtaining the relief.

Multiple dwellings relief is available when at least two dwellings are purchased in a single transaction, or as part of a series of linked transactions between the same vendor and purchaser.

The buyer can choose to apply the rate of stamp duty land tax determined by the average value of the dwellings, rather than the combined value of the purchase.

This enables the buyer to benefit from multiple nil-rate and lower percentage bandings, significantly reducing their stamp duty land tax liability.

HMRC could restrict the relief so it can only be claimed if all properties are, or a single property is, bought for a qualifying business use.

Alternatively, the tax authority could introduce a subsidiary dwelling rule to prevent smaller subsidiary dwellings, such as a ‘granny annex’, from qualifying for the relief due to their size or value.

The other option was for the relief to only apply to purchases which include three or more dwellings, meaning a lot of properties could fall outside of scope for the relief.

Mixed-use properties are those which consist of both residential and non-residential uses, such as a flat above a shop or pub. Purchases of these properties are subject to stamp duty land tax at the non-residential rates.

These rates offer lower stamp duty land tax bands and are not subject to any surcharge, leading HMRC to believe some purchasers have gained from including token amounts of non-residential property within residential purchases.

To close this loophole, either a new apportionment basis or a new threshold, so that more than 50% of the purchase must include non-residential property to qualify as mixed-use, could kick in.

Talk to us about property taxes.

March 2022

More than two million people missed a self-assessment tax return deadline on 31 January 2022, according to HMRC. 

The tax authority said more than 10.2 million returns were filed ahead of the original deadline, leaving 2.3 million still to file.

Late-filers had until 28 February 2022 to file their 2020/21 tax returns online before being fined, due to pressures ensuing from the pandemic.

However, interest on outstanding tax bills is accruing at 3% and HMRC’s late-filing penalties regime kicks in as usual from 1 March 2022.

Late-paying taxpayers have until 1 April 2022 to pay their tax bills in full, or set up a time-to-pay arrangement.

These arrangements spread the cost of repaying tax bills of up to £30,000 into manageable monthly instalments, usually over a period of up to 12 months.

A 5% late-payment penalty will be charged if tax is not paid or a payment plan has not been set up by midnight on 1 April 2022.

Myrtle Lloyd, director-general for customer services at HMRC, said:

“I’d like to thank the millions of customers and agents who sent us their tax returns and paid in time for January’s deadline.

“Customers can set up a monthly payment plan online if they’re worried about paying their tax bill.”

More than 10.2m people filed their 2020/21 tax returns on time, down from 10.7m last year.

Contact us about any aspect of self-assessment.

March 2022

The Treasury is being urged to consider a late U-turn on introducing the National Insurance contributions (NICs) increase next month to boost apprenticeships. 

All NICs rates will increase by 1.25% from April 2022 to help fund the development of the new health-and-social-care levy, which kicks in from April 2023.

The Federation of Small Businesses (FSB) wants ministers to ditch increasing the so-called ‘jobs tax’ to help recover lost apprenticeship numbers.

The FSB claimed apprenticeship starts fell from just under 500,000 a year in 2016/17, before the introduction of the apprenticeship levy, to under 325,000 in 2020/21.

To address this downward trend, the FSB wants the Treasury to remove all employer NICs costs for apprentices, plus cancelling the planned increases to NICs and dividend taxation to free up funds for recruitment and training.

It also would like the apprentice payment, which was worth £3,000 to employers that hired apprentices, to be reinstated after the scheme closed on 31 January 2022.

Mike Cherry, chairman at the FSB, said:

“By looking again at its approach to NICs, the Government can make a real difference here – directly, by bringing down the immediate costs of taking an apprentice on, and indirectly, by freeing up more funds for recruitment and training at a moment when cash reserves are depleted.

“Small businesses disproportionately hire young people and those from disadvantaged groups when they create apprenticeships, so a targeted reintroduction of the hiring incentive that existed over lockdowns makes sense in the context of the levelling-up agenda.”

However, the Government has no intention to renege on its promise after a spokesperson said Chancellor Rishi Sunak is “fully committed” to increase NICs and dividends tax.

Despite being written into law, this could yet change amid growing concerns over rising energy prices and the cost-of-living crisis engulfing many households.

Contact us to discuss managing costs. 

March 2022