AUTUMN TAX DEBACLE!

RRL tax partner, Steve Maggs, keeps us abreast of the latest developments that could affect your business.

In around two months we had a ‘miniBudget’ that ended-up being almost entirely reversed, and then another set of tax announcements in the Autumn Statement.

On November 17, the Chancellor (our fourth of 2022!), made the Autumn Statement announcement that the government desperately wanted to rebuild its reputation regarding public finances and to attempt to provide ‘the markets’ with a degree of confidence following the “mini-Budget” debacle.

From a purely tax perspective, many may be excused for thinking the announcements “weren’t so bad”, however, things like the freezing of tax thresholds when we are experiencing rates of inflation that we are, are significant tax rises in all but name.

Our initial summary of the headline tax announcements is as follows:

• A freeze on many tax thresholds until the 2028/29 tax year (six years away – previously frozen until April 2026) – including the income tax personal allowance, higher-rate income tax threshold, NIC thresholds and bands, and inheritance tax standard nil-rate band and residence nilrate band. This will bring more into the scope of higher-rate income tax, more paying more income tax, more losing their child benefit and personal allowance, and more estates paying inheritance tax –all increasing the need for planning;

• The additional-rate income tax threshold (at which the 45% income tax rate (39.35% for dividend income) is payable) will reduce from £150,000 to £125,140 from the 2023/24 tax year onwards –showing a stark contrast to the “miniBudget” on 23rd September 2022 where the additional-rate was to be scrapped;

• The capital gains tax annual exemption will reduced from the current £12,300 for individuals to £6,000 for the 2023/24 tax year, and then further reduced to £3,000 in 2024/25 – this will require more individuals to pay capital gains tax, and therefore more to report capital gains that previously didn’t need to be reported.

• The dividend allowance will be reduced from £2,000 to £1,000 for the 2023/24 tax year, and further reduce to £500 for the 2024/25 tax year (a 10th of the original dividend allowance when it was created!) – this will require more individuals to pay income tax on dividend income, and again more to report the income to HM Revenue & Customs;

• The SDLT changes for residential property announced at the “mini-Budget” (when of the few measures that stayed!) will be kept in place until 31 March 2025;

• The Business Rates revaluation will go ahead and come into effect on 1 April 2023, based on property values from 1 April 2021. The Business Rates multiplier is to be frozen for another year (in 2023/24), and the Retail, Hospitality and Leisure relief scheme is being extended from 50% to 75% for 2023/24, up to £110,000 per business – this will be welcome for many businesses in Cornwall.

• No increases in the capital gains tax rates were announced, as was strongly rumoured – a phoney win for some!

• No changes to higher-rate income tax relief on pension contributions were announced, which was, again, strongly rumoured – how many times has this been the case now? Another phoney win for some!

• Increased to the National Living Wage and National Minimum Wage from 1 April 2023 – the National Living Wage for those aged 23 and over will increase to £10.42.

• The VAT registration and de-registration thresholds will be frozen until April 2026.

• Changes to Research and Development (R&D) tax relief were announced that will make the relief much less attractive for SME limited companies – from 1 April 2023, the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%. The credit rate for the large company scheme will increase from 13% to 20%. This clearly shows the government’s thoughts about where to focus the benefit for incurring qualifying R&D expenditure.

• Tariff suspensions on over 100 goods were announced for a period of 2 years “to help put downward pressure on costs for UK producers.” – suggests an indirect admission around the impact of the taboo subject, Brexit?

• Electric cars will be subject to Vehicle Excise Duty from April 2025, and the company car benefit-in-kind percentage will increase by 1% in each of the coming 3 tax years – increasing to 5% in 2027/28.

Its times like these that experienced, competent, and proactive tax advice is in high demand – and rightly so!

These are the key findings of an evaluation commissioned by the British Business Bank from independent research consultancy SQW.

The fund was established by the British Business Bank and the Cornwall and Isles of Scilly Local Enterprise Partnership in June 2018 to provide commercial debt and equity finance from £25k to £2 million to small businesses in Cornwall and Scilly.

The evaluation covered debt and equity finance provided up to March 2022.

Highlights include:

• 90% of businesses surveyed said investment from CIOSIF had increased business resilience.