The new Chancellor has announced his ‘mini-budget’, setting out the Government’s economic policy to combat the cost of living crisis and recession affecting business and individuals around the country. Just 6 months on since the last budget, there have been numerous changes and back peddling in today’s budget. Jamie Morrison, Head of Tax, says “The new Government has made political choices to make a mark. However, after years of overspending and £50bn worth of unfunded tax cuts, the debt won’t magically disappear. Expect bigger changes and further U-Turns in the next 12 months to address this.” Read our thoughts on the key announcements.
Income tax changes – 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.”
Stamp Duty – 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.”
Scrapping corporation tax – Toby Ryland, Corporate Tax Partner, said:
“Corporation tax is 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.”
IR35 changes to payroll – Tim Walford-Fitzgerald, 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.”
For more information, or to discuss your specific circumstances, get in touch.