Although accountants are rarely noted for being wistful, this time of year actually does feel like the genuine start of a year. 

So it makes financial sense at least that April is the beginning of the new financial year for business owners and directors. 

And while your accountant will be able to bring you firmly up to speed with all the financial changes that have come into effect since April 1st – we thought we’d summarise the biggest additions.

The three most notable elements that are changing for businesses are an increase in the VAT threshold, a rise in the national minimum wage rate and changes to research and development (R&D) tax relief. 

The VAT threshold for businesses is raised from £85,000 to £90,000 which means that 28,000 small businesses will no longer be paying VAT.  This is the first change to this business tax since 2017. 

New rules on R&D tax relief have also come into force which has seen the merger of the existing SME and large business R&D tax into a single scheme, although intensive R&D will exist in a new, separate scheme. 

Despite increased pressure and lobbying led by the hospitality industry for a reduction, the small business multiplier for business rates will remain frozen for a fourth consecutive year.

There was a 12-month extension for 75% business rates relief for the retail, hospitality and leisure (RHL) industries although in Wales this is 40%.

The national minimum wage has risen to £11.44. 18 to 20 year olds saw their rate increase to £8.60 per hour while workers aged under-18 and apprentices will now be earning £6.40 per hour.

Capital Gains Tax

Landlords that hold property in a limited company or personally will be able to take advantage of a reduced capital gains tax (CGT), down from the standard rate of 28%. 

The lower rate of CGT for residential properties remains unchanged at 18% as do non-residential properties at 10% for gains within the basic rate band and 20% for gains above. 

Tina McKenzie, policy chair of the Federation of Small Businesses (FSB), said: “This is a big month for small businesses. 

“FSB has campaigned for decisive action to increase the VAT threshold, freeze business rates and extend the retail, hospitality and leisure discount and we’re pleased that these have come in.”

We’re not sure the hospitality industry will be as delighted given they are facing a historic staffing crisis across the industry with 132,000 approximate open vacancies, 48% higher than before the pandemic. 

Now they have to find additional funding for the wage rise for their existing staff and apprentices too. On average a full time worker contracted to work 36 hours per week will now earn £22,000 a year before tax.  

There will also be an increase in the associated costs including National Insurance Contributions (NICs) and holiday pay. 

While National Insurance was cut from 12% to 10% in January and the tax paid by employers and employees reduced by a percentage point, the savings were cancelled out as NIC thresholds were frozen up to April 2028 which means more workers would pay NI as their wages rose. 

Chris Horner, insolvency director with BusinessRescueExpert, said: “Wage rises are generally a good thing all round.  Employees have more money to spend, making them happier and more productive and spending that money in the local economy will also help other local businesses. 

“It’s a virtuous circle but a one-size-fits-all blanket size, especially for struggling sectors such as hospitality, couldn’t come at a tougher time. 

“Already having to fight hard for staff, the competition for talent is only going to get more fierce and is especially tough on newer businesses looking to establish themselves and can only afford, initially, to pay a national minimum wage. 

“Companies underpaying staff will face prosecution and fines of 100% of the employees maximum wage. So in order to make ends meet, firms will be looking to cut back even further on expenses, supplies and maybe even the hours of some staff.”

A string can only stretch so far before it snaps. Sometimes circles can’t be squared and for whatever reason, even the best ideas don’t come off. 

Business owners are still facing uncomfortable times ahead with little economic certainty to build their future growth plans upon.

This is why we offer them or any director a free initial consultation to give them a realistic and timely path forward.  

If there’s a way forward for the company then we can help pinpoint it and the steps required to achieve it – but only if they take the most important step first and get in touch with us to arrange a call.