The dates of 1st April and 6th April (as the start of the new tax year) traditionally bring a new set of rules from the Government and this year is no exception.
Some of these changes may appear fairly minor in isolation, but the cumulative effect could be quite damaging to businesses who are already operating on reduced margins.
Some of the key changes are:
1. Corporation Tax
For companies who have taxable profits in excess of £250k per year, their tax rate will increase from 19% to 25%. The smallest companies with profits below £50k per year will still pay 19%. However, those with profits between £50k and £250k will pay 25% minus a tapered amount, which can mean their effective marginal rate is higher.
The Government has created a calculator for companies to work out their marginal rate. In their advance research, the government expected 30% of companies to be impacted by the rate rise.
2. Minimum Wage, National Living Wage and Statutory Leave
Employers will need to increase the hourly rates they pay for their staff from 1st April. The National Living Wage is payable for those aged 23 and over and the National Minimum Wage for those who have passed school leaving age. There is also a rate for apprentice.
More details can be found here. Statutory maternity pay, sick pay and other leave benefits also increase.
3. Energy Bills
The Government support for the increased energy bills, the Energy Bill Relief Scheme, comes to an end for most businesses on 31st March. However, a new scheme has been introduced for some sectors who are “energy or trade intensive”. Further details of those sectors can be found here.
The price of energy is still unpredictable and as yet, the Government has not announced if there will be any future support schemes. As rates have now started to decrease, those businesses who renewed their contracts at the highest rates may find that they are incurring substantial bills.
The British Chambers of Commerce has reported that 65% of businesses intend to increase their prices to manage their higher costs. Most companies are unlikely to find that this meets the whole gap and therefore profits, and eventually cashflow, will also be impacted.
5 ways you can help your client stay ahead of increasing costs
- Ensure your clients understand the importance of having reliable and up to date financial data at their fingertips when they are experiencing rapid change
- Encourage your client uses some form of financial forecast or cashflow projections to identify when the cashflow squeeze will occur
- Help your client recognise the impact of their average 6-12 months credit score to open up increased lines of free credit from suppliers, plus the best terms and the most efficient lending rates from external finance providers
- Apply for any necessary finance facilities in good time, to provide your client with the most options available in the market.
- Review your clients key debtor risk, credit control procedures and debt recovery processes, and know which customers they should be monitoring more closely
Capitalise for Business provides credit data and monitoring tools which your clients can use to understand their own score and track other companies’ live scores to assess their trading risk. Speak to us to find out how you can offer these tools directly to your clients.
For more ways to understand how to protect your clients’ from these changes, download our free guide.