What the autumn statement means for independents
Atif Butt looks at the key measures announced in last month’s ‘fiscal event’ and how they might impact the independent pharmacy sector…
Following the fallout from Kwasi Kwarteng’s mini budget just a couple of months ago, the new Chancellor Jeremy Hunt presented his Autumn statement on 17 November 2022, when he set out his plans for tackling the cost-of-living crisis and rebuilding the UK economy with a programme of tax rises and spending cuts.
He started by saying his priorities would be stability, growth and protecting public services, and went on to commit to a £3.3 billion increase in the NHS budget and £2.7 billion more to be spent on social care over the next two years. Yet again there was no mention of community pharmacy or of any plans to provide additional support in light of the unprecedented challenges and financial pressures the sector currently faces.
After warning of tough decisions and the need for cuts to spending to address the so called ‘fiscal black hole’ at the heart of the nation’s finances, the statement introduced tax rises calculated to be worth £24 billion, together with around £30 billion of spending cuts.
However, amidst the bitter medicine there were some welcome surprises like the commitments to provide additional support with the cost-of-living crisis for businesses and households. Benefits are to rise in line with inflation, public spending will continue to increase in real terms and the triple-lock on pensions will be maintained.
Let’s look at some of the other key announcements from the autumn statement and how they could affect pharmacy business owners.
Personal taxes – Rather than increasing tax rates across the board, the Chancellor opted to boost government revenues by freezing personal allowance thresholds for income tax, inheritance tax and pensions savings tax until April 2028, in what many are calling a ‘stealth tax’ raid.
He also lowered the threshold of the 45 per cent income tax rate from £150,000 to £125,140, which is also the point where taxpayers lose their personal allowance. This will not apply in Scotland as the Scottish parliament sets income tax rates there.
In good news for those who run their business through a limited company there were no changes to the dividend tax rates, although the annual dividend allowance is to be cut from £2,000 to £1,000, and then by a further £500 in the next year.
The annual capital gains tax (CGT) allowance will also be slashed from £12,300 to £6,150 with a further fall to £3,000 planned from April 2024, but there are no changes planned to the main CGT rates or any of the reliefs available like Business Asset Disposal Relief (BADR), as many had predicted.
This will be a welcome relief to pharmacy owners who are thinking of selling their businesses in the near future, as under the current rules they can still utilize BADR to minimise their tax bill on a sale.
Staff costs – From next April the national living wage will increase from £9.50 to £10.42 so pharmacies are likely to see an increase in staff salary costs. The main thresholds for employers’ National Insurance have also been frozen till April 2028 meaning tax bills for employers will rise too. However, it was also announced that Employment Allowance will be retained at an increased level of £5,000 per year, which will benefit SME employers, and means 40 per cent of all businesses will pay no NICs at all next year.
R&D tax relief – The Research and Development relief scheme can provide valuable tax relief for pharmacies that have modernised and invested in new technologies such as robots or new software systems. Some changes to the scheme were announced at the start of the year, and further changes have now been set out to take effect in April next year. For larger companies there has been an increase in the tax credit available to 20 per cent, whereas those companies that qualify for the SME scheme will see the additional tax relief deduction falling from 130 per cent to 86 per cent and the available tax credit reduced to 10 per cent.
Business rates – Under existing plans many businesses could face higher business rates bills from 1 April 2023 following new valuations on their trading premises. As part of its support measures the government will soften the blow for businesses with a package of support worth £13.6 billion for those affected, and this is predicted to benefit about 700,000 businesses.
While the autumn statement wasn’t quite as bad for businesses as some may have feared, there is no doubt that it represents a major squeeze on household finances at a time of rising costs and economic uncertainty.
Let’s hope the additional support promised by the government will be forthcoming and go some way to alleviating the financial pressures faced by UK households.
Atif Butt is a senior accountant from Hutchings Accountants.