The Chancellor has announced his “mini” Budget – 6 months on since the March Budget and there are some milestone tax changes to be aware of.
Here are some of our key takeaways.
Jamie Morrison, Head of Tax said:
“Wow! A huge decision from The Chancellor to cut the basic rate of income tax to 19% – this will impact everyone.
“Middle class forgotten? The abolition of the 45% rate leaves in place the 60% tax rate suffered by thousands in the £100-£125k bracket, another threshold that has remained unchanged for many years. Smart, political moves today and it is hard to see how the 45% shift benefits anyone apart from higher earners.”
Speaking on the Chancellor’s announcement to scrap the plan to cut the 45p rate tax rate ten days after the original announcement, Jamie said:
“It was a bold move by the Chancellor to cut the top rate of income tax in his mini-budget – and one that has not paid off. Tackling the UK’s cost of living crisis should be the government’s top priority and it was hard to see how the abolition of the 45p tax rate would have benefitted anyone apart from the UK’s highest earners.”
Jamie Morrison, Head of Tax said:
“Slashing Stamp Duty will open up the UK property market to overseas investors. Given the strength of the dollar and dollar-linked currencies – expect a flood of overseas property investors. While this is a positive move for UK Inward Investment – bigger challenges with interest rates remain. For example, an 0.75% increase in interest rates would add over £1,250 to the yearly costs of servicing a £200,000 mortgage on that property. This is a rise that many won’t be able to afford.”
– Corporation Tax: The planned rise on corporation tax from 19% to 25% is scrapped
– Annual Investment Allowance: tax relief for businesses on plant and technology investment – to remain at £1m permanently, rather than letting it return to £200,000 in March 2023
– Investment Zones: To cut taxes for businesses in designated sites for 10 years to support investment, jobs and growth. In talks with 38 local and mayoral combined authority areas in England about “investment zones”. Aims to roll out more widely across the UK
– Business Rates: There will be no business rates to pay whatsoever and if a business hires a new employee in the tax site, then on the first £50,000 pounds they earn, the employer will pay no national insurance whatsoever
Toby Ryland, Corporate Tax Partner said:
“Corporation tax increases are cancelled! Businesses across the UK will be celebrating today, particularly for those who are already facing the uncertainty of inflationary pressures and fuel cost increases. It will also help to maintain the UK’s status as a low tax jurisdiction and keep it as an attractive option for overseas investors – with the lowest corporation tax in the G20.’
“However – is this a decision to level up or level out? Don’t forget that these changes will need to be funded from somewhere – watch out for further detail elsewhere.”
Tim Walford Fitzgerald, Private Client Partner said:
“Cutting the red tape around off pay-roll working is a huge move by the Chancellor, and should help to massively simplify the tax process for businesses and offer greater freedom to contractors. It’s certainly a welcome reversal to a regime that previously led to cautious and time-limited clients making deductions that may have been entirely unwarranted if truly objective reviews of both contracts and actual practices could have been undertaken.”
Carol Rudge, Head of Not-for-Profit said:
“The Gift Aid transition period is good news for the sector. However given the impact of the cost of living crisis on individuals and thus the increasing demands on charities, more needs to be done to assist the vulnerable and the charities working with them to give support.”
It can be difficult to calculate what the reality of these announcements means for individual circumstances and often a lot of the detail is missed during the Chancellor’s speech. If you would like to have a conversation with one of our partners about how today’s Statement will impact you and your business, or individual circumstances please do get in touch directly.