Tax and business news this week
Well, it's been busy week in the tax and business world. A week where the Bank of England raised interest rates again, where Rishi Sunak refused to delay or cancel his planned NI increase, fuel prices hit record levels. A week where inflation is predicted to hit double digits and where sadly war continues in the Ukraine.
The consumer price index (where the price of a basket of goods and services is measured) has risen sharply and is at it's highest for 40 years at 7.5%. This means that the price of goods and services we commonly use has risen year on year by 7.5%. This is going to have a major impact on households and businesses alike, particularly with interest rates increasing and the government planning a huge increase in NI from next month. This increase is being labelled as a 1.25% increase, but it's not. NI rates are increasing from 12% to 13.25% for employees. That's an increase of 10.4% in employees national insurance costs. There's also a massive tax grab on the horizon that's also been downplayed in the media. In the 2021 budget the chancellor announced that the personal allowance would be frozen from four years, from 22/23 to 25/26. This means the point at which we pay income tax will be frozen for four years, just at the point inflation hits levels not seen for 40 or 50 years and fuel costs become crippling for low earners.
So what can we do to protect ourselves or mitigate the risks?
Change loans and mortgages to fixed rates from variable rates. With more interest rate increases on the horizon from the Bank of England, we can be sure of two things. Banks won't pass this onto savers, but mortgage lenders will immediately pass it on to borrowers. if your loans or mortgages are on a variable rate, or about to be, secure them on a fixed rate. If you have savings paying a pittance in the bank, look to other investments with a better return. Bonds etc. are still relatively low risk.
If you receive a car allowance, or if your company provides one, then if you have cars coming up to be replaced, consider a switch to electric. Car allowances are taxed the same as salaries. Swapping a car allowance for an electric company car means you'll pay tax on 2% of the list price of the car. This has been fixed through to the 24/25 tax year. There's also no excise duty to pay either. There are a myriad of other benefits too for employers and employees, so this could save £000's per year.
Cut unnecessary energy usage. Do you leave your shop sign illuminated overnight? a quick win would be to turn them off, after all, do you really gain any new business from have an illuminated shop sign lit on a night time when you are closed? Keep doors and windows closed to keep heat in, and maybe turn those radiators down slightly. Turn off the lights when you leave a room. Turn appliances off instead of on standby. The list is pretty endless when you stop to think about energy usage.
Shop around. Are your suppliers giving you the best deal? When was the last time you had a look? Ask your current suppliers for a better deal. Could you help each other? Fewer deliveries would reduce their shipping costs, and might make it simpler logistically, so some of the savings could be passed onto you.
Efficiency savings. Looking at processes, procedures and systems to identify efficiency savings. Lean and six sigma principles can be applied to businesses outside of manufacturing.
Of course, having done all you can to find savings, we are left with the one option that most of us are reluctant to do which is to put up prices. Given the increased costs and inflation, it probably won't come as much of a surprise to customers.
Well that's it for this week, but just on a final note, we've followed our own advice and put our prices up!