Consultancy, RB+ Chartered Accountants, advises that Northern Ireland’s owner-managed businesses should be alert to challenges as we enter into the 22/23 UK Tax Year.

Following the Chancellor’s spring statement last month, Ross Boyd, Director at the firm, counsels that incoming changes such as the cessation of the reduced rate of VAT for the hospitality sector, bodes for a difficult year ahead.

Businesses will face a high tax burden due to various tax generating initiatives.

Ross Boyd

Ross explains, “Businesses are under more financial pressure than ever as inflation hits a 30 year high and is projected to rise to close to 9 per cent by the end of this year. It’s clear that the chancellor remains committed to progressing tax generating initiatives, which will impact directly on local businesses.”

The increase in National Insurance took effect on 6^th April and Ross warns of its direct impact on business owners, especially for high performance businesses.

He continues, “These challenges are compounded by the impact of the recent National Insurance increase, which will be felt most keenly by those earning over £35,000 – a salary bracket that includes many of NI’s business owners and growth areas of the economy

“Although the chancellor has made an attempt to mitigate the hike by increasing the National Insurance threshold by £3,000 from July to bring it in line with Income Tax Personal allowances, this still represents a significant challenge for our business owners who will need to examine how they can cut back to sustain revenue and profits. They may, for example, need to examine cash flow forecasts and begin monitoring staffing costs or structures.”

Ross also points out that businesses within the hospitality sector will be impacted by the cessation of the reduced rate of VAT for the hospitality sector, which ended on 1st April. The VAT rate for most goods and services within the hospitality industry has since increased from 12.5 per cent to 20 per cent

He says, “With the reduced rate for VAT having ended this month, the hospitality sector is under particular duress at the moment. These businesses are still recovering from the pandemic and the return of VAT to pre-pandemic levels could restrict growth and investment and curtail recovery. Increases to minimum wages further this pressure on the sector.

It is also important that employees begin the new tax year on the right foot by ensuring that they are on the correct tax code. It is each individual’s responsibility to make sure that their tax code is correct, to avoid a monthly tax deduction that may be too high, or an amount owing by the organisation at the end of the year

Ross says, “It’s critical to get your tax code right. If you get it wrong, you might end up underpaying, or overpaying, on your taxes which could lead to a tax investigation from HMRC. There are lots of things that can be done to reduce your effective rate of tax.”

Ross also notes that, whilst the incoming increase in Corporation Tax is scheduled for 2023, it is never to early for businesses to begin preparing

He says, “Whilst a year may seem like a long time, I would advise businesses to begin planning now to mitigate the impact of the 25 per cent Corporation Tax increase, which will inevitably impact upon organisations’ after-tax profits. This is a massive change for small businesses and ends the benefits of a limited company model for many.

“At RB+ Chartered Accountants, we have over twelve years’ experience advising owner managed businesses across Northern Ireland and are committed to supporting our clients’ growth and maximising their wealth. We would encourage any business navigating this challenging tax landscape to seek expert advice as soon as possible.”