When you’re looking at starting a new business, it is important to assess the economic and political direction of travel and assess how these will impact your fledgling business.
And today’s announcements are the biggest for 50 years, ushering in a new, low tax era with the aim of kickstarting growth and making businesses more competitive.
But how does this affect the home care sector? We look at each measure and gauge potential effects.
Employer National Insurance and Dividend tax rises scrapped ✅
Homecare businesses have a relatively large wage bill as a proportion of their overheads compared to the average business. Ironically for a tax dubbed the ‘Health and Social Care Levy’, this had increased the wage bill on just the sort of business and service that it is designed to support.
Dropping the 1.25% increase in Employer’s NI contributions will save the average care company thousands of pounds per year. And given the structure that most home care company owners use to pay themselves, the dividend tax increase being scrapped has a big impact on how expensive it is to take profits out of your care company.
Reassuringly for the sector, the government has pledged to honour the extra funding and reforms for Health and Social Care, despite dropping the Levy. This will be paid for by more borrowing, for better or for worse.
Income tax reduced to 19% from next April ✅
A help for your team and your clients, income tax is being reduced from 20% to 19%
Corporation Tax to be kept at 19% ✅
Again, another help for business, but it was the very large profits of over £250k that would have attracted the full 25%, with a sliding % scale from £50k to that £250k figure. Scrapping the planned increases does make the tax simpler as well as lower.
An extra £500m for Social Care ✅
Separately, the new Health Secretary Thérèse Coffey has announced £500m for social care this winter to support hospital discharge. This is an indication that the government understands the vital role of social care in the effective functioning of the NHS, with further pledges made to improve funding in the years to come. https://www.bbc.co.uk/news/health-62998146
General effect on the economy❓
Some economists are warning that effectively adding billions of pounds into the economy through tax cuts might actually make inflation worse, forcing the Bank of England to increase rates by more than they would have planned. This affects homecare start-ups if funding is needed, as this can be linked to the BoE’s base rate of interest. It might be worth expediting plans to lock in lower rates of interest if a homecare start-up is on your agenda.
What is clear is that there will be some interesting times ahead. Homecare is a recession resistant business due to huge and growing demand, and the non-discretionary nature of the service.
The government seems to be starting to understand and reflect the importance of the homecare sector, and this should bring the funding and support needed to support the boom in demand over the next two decades.
For a chat about starting up a homecare business, book a call with Ben Ashton, co-founder of GoodOaks, by going to www.calendly.com/benashton/discoverycall and choosing a time that suits you.