Corporation Tax And Wage Increases: Is Moving Abroad The Answer?
After a tough 12 months, the 2021 Budget announcement – along with the roadmap for easing lockdown restrictions – provided a much-needed boost to members of the hospitality industry. But while the sector can look forward to a gradual reopening this summer, it isn’t all good news.
Although the government will continue to offer vital support for hospitality businesses; corporation tax, the National Minimum Wage and the National Living Wage are all set to increase.
Here, we take a look at what these changes might mean for the industry, and whether moving abroad could be the answer…
Increase to corporation tax
In his Spring Budget, chancellor Rishi Sunak announced that the government will extend economic support measures at a cost of £65bn. Unfortunately for the hospitality industry (and most UK businesses), this additional aid will be followed by one of the biggest corporation tax increases in decades.
In April 2023, the corporate tax rate will rise significantly from 19% to 25% – potentially leaving Britain with its highest tax burden since the 1960s. This change will affect companies whose profits exceed £250,000, so around 30% of all UK businesses.
Rise in minimum wage
Corporation tax isn’t the only thing going up. In his announcement earlier this month, the chancellor stated that from April 2021 the National Living Wage will increase by 2.2% from £8.80 to £8.91. We’ll also see a 2% rise in the National Minimum Wage, from £8.20 to £8.36.
For a hospitality business with a considerable amount of employees, that’s quite the increase. Especially when you consider that the National Living Wage will also be extended to include 23 and 24-year-olds, adding around £350 per year to the earnings of those in full-time employment.
Consequences for the industry
Most businesses in the industry have had lots to cope with over the last year, with money worries being top of the list. But, despite being closed and generating little-to-no income throughout the pandemic, many are now due to pay millions of pounds in rent – causing problems for companies throughout the sector.
Although the government’s short-term plans – including extension of the furlough scheme and continued 5% reduction of VAT for the sector – aim to reduce the risk of company failure, raising business costs by increasing corporation tax and wages could undermine these objectives. While it’s reasonable to assume that such strategies might improve employee turnover and retention, if introduced too soon they could have a negative impact on profit levels.
Moving your business forward
The 6% corporation tax increase will certainly affect much of the hospitality industry, but it’s important to note that the rate of UK corporation tax remains the lowest in the G7. So, rather than packing up and moving your hotel or restaurant abroad, as many businesses could now be considering, why not use the latest digital technology to your advantage?
With companies now expected to pay much higher tax rates along with other increases, there’s an urgent need for an effective solution to help manage operational costs. That’s where Harri comes in.
Our technology offers a way to cut business expenses by automating the entire payroll process – with no hidden costs or fees. The platform ensures you have sufficient funds to pay those all-important expenses, taking some of the weight off your shoulders so you can focus on boosting your business this summer.
Want to learn more about Harri? Head to our homepage to request a demo and our friendly team will be in touch as soon as possible.