Governmental Changes

The UK government makes changes, usually on a yearly basis, to regulations that can increase the costs an enterprise must pay. These can include changes in:

Taxation

  • VAT (Value added Tax) is currently 20%. However it has previously been charged at 17.5% and then reduced to 15% before being increased to its current rate in January 2011. What impact do you think it had on small businesses when it increased to 20%? What impact could it have if it changed again?


  • Income Tax – Currently, the personal allowance for the tax year 2019-2020 is £12,500. What does this mean? The personal allowance for the tax year 2018-2019 was £11,850. What impact do you think this has had?

Any earnings between £12,501 and £50,000 is taxed at 20% (basic rate). What do you think this means?

Earnings above £50,001 but below £150,000 are then taxed 40% (higher rate) and £150,001 and above at 45% (additional rate).


  • National Insurance (NI) contributions are paid by entrepreneurs on behalf of their employees and themselves. NI contributions goes towards paying for pensions, medical expenses and the NHS.

Minimum Wage

This is the minimum wage rate a business must pay its staff. The April 2018 rates were:

  • Apprentices from - £3.70

  • under-18s - £4.20

  • under-20s - £5.90

  • under-24s - £7.38

  • aged 25 and over - £7.83

However, from April 2019 they increased to:

  • Apprentices from - £3.90

  • under-18s - £4.35

  • under-20s - £6.15

  • under-24s - £7.70

  • aged 25 and over - £8.21

General Data Protection Regulations (GDPR)

From 2018, the GDPR means that businesses must store the personal data of their customers correctly to keep it safe. Setting up the new data protection system could cost an enterprise extra money. However, it will need to pay these costs in order to avoid breaking the law. If a business does not comply with the regulations, the owner could face a fine or a prison sentence.

As with all other costs increases you have learned about, any changes made by the government will eventually find their way to the customer.

Lesson 3 Governmental changes.pptx