The impact of the Budget on leisure and tourism businesses
The Summer Budget was not all good news for the tourism and hospitality industry. A number of businesses in the sector have voiced concerns regarding the introduction of the national living wage and how it will impact their business. With a large proportion of employees in the industry on the minimum wage there are concerns that this will push up prices and could cause job cuts and reduced investments, resulting in understaffed establishments and lower standards.
National living wage
A new national living wage for over 25s of £7.20 will be introduced from April 2016 and will rise to £9 by 2020. This compares to a minimum wage of £6.50 at present. The national minimum wage will continue for younger workers.
Better news for employers is the raising of the employers national insurance allowance to £3,000 meaning that an employer could take on three people on the national living wage before they start having to pay employers’ NI contributions.
There were a number of other key announcements:
A positive change for companies is the reduction of corporation tax from 20% to 19% in 2017 and to 18% in 2020 – although clearly we’ll have to wait and see what the net result to companies is once the national living wage is fully implemented in 2020.
The planned changes to the taxation of dividends will affect business owners who draw their remuneration as dividends. For a long time dividends have been a more tax efficient of drawing income than paying a salary but the new rules have been designed to close that gap. Each company will need to carefully look at how they pay themselves from their business.
The raising of the personal allowance to £12,500 by the end of this Parliament, and the raising of the higher rate threshold to £43,000 per annum from April 2016, means 130,000 less people will find themselves paying tax at the higher rate. This will be welcome news for many who may consider themselves ‘comfortably off’ but by no means wealthy.
Investing in your business
The Chancellor is setting the annual investment allowance permanently at £200,000 from January 2016 – meaning that companies can deduct the full value of certain equipment and machinery from their profits before tax is calculated, rather than having to settle for tax relief over several years. If you are considering refurbishing your premises this is good news.
Please do get in touch with Rachel Marsdin if you need any advice regard to any of the points raised in this article.