Pre-election Budgets tend to be full of political posturing and understandably very little tax reform or significant change. With a general election ahead of us, there was certainly more political posturing than normal in the Chancellor’s statement.

Much was made of the economic turnaround and I’ll leave you to decide whether that was due to government policies or macro-economic factors.

Here are some of the key changes that were announced:

• A reduction in employee's Class 1 NIC from 10% to 8% on earnings between £12,570 and £50,270 and from 8% to 6% for the self-employed.
• The capital gains tax rate on the sale of residential property will be reduced from 28% to 24%.
• The abolishment of the Furnished Holiday Lettings regime, removing the tax reliefs and advantages.
• The VAT registration threshold will be increased from £85,000 to £90,000.
• The non-domicile regime will be abolished and replaced with a residency based system.
• Consultation on changes to the High Income Child Benefit Charge with the threshold increasing from £50,000 to £60,000 from 6 April 2024.
• Enhanced reliefs and incentives for the creative industries, including film, TV and theatre businesses.
• Consultations on improving investment in British businesses with pension freedoms, a British Savings Bond and an additional £5,000 British ISA allowance.
• Full expensing for capital expenditure has been extended to include leased assets.
• A Public Sector Productivity Plan with investment in technology and efficiency improvements.

Please get in touch if you would like to discuss the changes in more detail and understand their impact on you.

On the back of last week's positive news of falling inflation, Jeremy Hunt seemed to have a spring in his step as he launched a series of changes with an air of confidence and optimism.

There has been much speculation over the past week on Inheritance Tax changes and possible tax cuts. There was no mention at all about Inheritance Tax but there were announcements of reductions in national insurance and full expensing for capital expenditure.

Here are some of the headlines:

• A reduction in employee's Class 1 NIC from 12% to 10% on earnings between £12,570 and £50,270 from 6 January 2024.
• Class 2 NICs abolished for the self-employed and a reduction in Class 4 NICs from 9% to 8% in April 2024.
• Full expensing for capital expenditure has been made permanent, which will give 100% relief and much needed certainty for businesses investing over the long term.
• The expected merging of the R&D tax relief schemes into a single simplified regime.
• There were promises of £500m investment in AI technology over the next two years and extending the 5 year tax breaks in investment zones to 10 years. Additional investment zones were announced in the East Midlands, West Midlands and Manchester.
• A hard line will be taken with welfare and benefits reform, aimed at getting more people into work and the National Living Wage will increase to £11.44 in April 2024.

Please get in touch if you would like to discuss the changes in more detail and understand their impact on you.

It was expected to be a “steady as she goes” Budget from Jeremy Hunt and that was largely what we got. He suggested it was a Budget for growth but it felt more like optimism with stability for a fragile economy aiming to keep inflation under control with promises of further changes in the future.

We already knew the main tax changes and rates that will be in place from previous announcements. The main headline being the increase in corporation tax rates to 25% for profits above £250,000 from 1 April 2023. Whilst the 130% super deduction is disappearing, it was pleasing to hear that 100% capital allowances will be available and uncapped from 1 April 2023. There was also an announcement of enhanced tax relief for R&D intensive SMEs.

Some headlines had been trailed earlier this week and there were major announcements today in a number of areas:

• The pension annual allowance increasing from £40,000 to £60,000 will promote larger lump sums to be saved, which will prove valuable given the corporation tax increase.
• One of the most significant tax changes was the announcement that the pension lifetime allowance has been scrapped. This was aimed at benefitting senior NHS employees and encouraging them to continue working. However, it will be welcome news for wealthy individuals as it represents a major tax giveaway.
• There were promises about investment in the technology and life sciences sector together with investment zones and innovation clusters. We will have to wait and review the detail on those announcements.
• The energy price guarantee has been extended until June 2023 and fuel duty continues to be frozen.
• Major childcare reforms were announced along with other measures aimed at encouraging people to get back to work (such as a new returnership training scheme for over 50's). These are being phased in over a period of time so it remains to be seen whether this will actually help with labour and skills shortages.

Whilst it was the relatively quiet Budget that many expected, there are some significant tax planning opportunities for the future so please do get in touch if you would like to discuss them further and understand their impact on you.

I love seeing the success of a business realised by the owners who have worked so hard in it and I have enjoyed advising on hundreds of transactions over the years. There is so much that I could write on this topic so I am going to break it down into a series of articles over the coming weeks covering different tax aspects.

Let’s start with a common question I am asked – how much tax will I have to pay on selling my shares? Well, like any good tax adviser, I respond with “it depends!”:

• If you qualify for Business Asset Disposal Relief (previously Entrepreneurs’ Relief) then it’s 10% on your first £1m (which is a lifetime limit).
• If you originally invested under EIS or Seed EIS then it could be 0% if you’ve owned the shares for the qualifying period of 3 years and claimed the original relief.
• Alternatively, if you didn’t qualify for EIS, you might qualify for Investor’s Relief, which would be a 10% tax rate on up to £10m (which is another lifetime limit).
• If you own any shares via a company then you might benefit from Substantial Shareholdings Exemption, where there is no tax to pay in the company but you need to consider how you extract the proceeds.
• And if you sell the company to an Employee Ownership Trust then it’s an unbelievable 0%.
• Anything else and it’s likely to be at the main rate of 20%.
• Be careful though, because if you get things wrong (for example, selling to connected persons or proceeds being linked to your ongoing employment) then it could be as high as 39.35% or 47%!

It is always advisable to plan ahead wherever possible so that you can minimise your tax liability on exit. For example, you might be able to use family members’ allowances and lifetime limits or organise your affairs to benefit from certain tax reliefs or deferrals.

If you are considering selling your business and want to minimise your tax liabilities then please do not hesitate to get in touch.

I know that pension savings aren’t everyone’s cup of tea but they do offer a highly tax efficient means of saving for retirement, reducing corporation tax and they can be a valuable inheritance tax saving tool.

Many people I know like to maximise their contributions, which ordinarily means a payment of £40,000 per annum (being the maximum annual allowance). They also tend to make one off contributions at the end of their accounting period, many of which are coming up on 31 December 2022. However, there’s an important reason to consider whether to make the payment before that date or delay it into the next accounting period.

Corporation tax rates are increasing from 1 April 2023, meaning that a company with a 31 December 2023 year end and profits in excess of £250,000 will save at an average rate of 23.5%. So, would you rather obtain tax relief of £7,600 on every £40,000 of contributions made before 31 December 2022 or delay until 1 January 2023 onwards and obtain relief of £9,400, saving an additional £1,800 of corporation tax?

If your profits are between £50,000 and £250,000 then the saving is greater as the marginal rate of corporation tax between those amounts for a 31 December 2023 year end is 24.65%, thereby saving £2,260 per £40,000 contribution.

The amounts may seem trivial to some but if you make significant pensions contributions across your owner managed business then I strongly recommend reviewing this in more detail. The same approach applies to year ends of 31 March 2023, where the savings are even greater of £3,000 for a marginal rate company.

If you haven’t already done so, it is also possible to access unused allowances from the three previous tax years, which could mean a one off contribution of £160,000 per person and the additional tax savings thereon.

There will be many other matters to consider (such as the cash flow cost of delaying the tax saving) and you should seek advice based on your individual circumstances before taking any action.

It’s been a rollercoaster in the tax and economics arena over recent months and today’s Autumn Statement has hopefully slowed things down but there was plenty of tinkering by Jeremy Hunt, which will no doubt be labelled in the press as “stealth taxes”.

We already knew the main changes on income tax and corporation tax, which are likely to mean a switch to salary from dividends for the first time in many years. I’ll provide comprehensive analysis and guidance on that topic in the coming weeks as business owners will want to plan ahead of those changes in April 2023.

Many thresholds have been frozen until 2028 and the threshold for the highest rate of income tax (45%) will reduce from £150,000 to £125,140 from April 2023, resulting in an extra £1,243 for those affected.  The annual CGT allowance will reduce from £12,300 to £6,000 in April 2023 and £3,000 in April 2024.  The tax free dividend allowance will also reduce from £2,000 to £1,000 in April 2023 and £500 in April 2024.

Thankfully, R&D tax relief wasn't abolished (despite the rumours) but the additional deduction under the SME scheme is reducing from 130% to 86% in April 2023 with the repayable tax credit also reducing from 14% to 10.5%. Interestingly, the rate under RDEC is increasing from 13% to 20%. In net cash tax terms, taking into account the corporation tax increases, large companies will receive an increased net RDEC of 15% (currently 10.5%) and SMEs will receive reduced relief of 18.6% - 21.5% (previously 25% -33%).

There were other announcements impacting electric vehicles with Vehicle Excise Duty being introduced from April 2025, together with an increase to the benefit in kind rate of 1% per annum at the same time. This will increase the tax on electric vehicles but they are still likely to be more financially attractive than non-electric vehicles.

We will need to digest the finer details but on the face of it the changes are not as dramatic as some were predicting which will hopefully provide much needed stability.

It feels like there is turbulence at every turn right now and that’s particularly true in the world of tax. In my 25 years of working in tax, I have never seen so many significant announcements and proposed changes (some might say U-turns!) in such a short period of time.

We were expecting a “medium term fiscal plan” to be announced by Jeremy Hunt but that has been postponed and instead there will be a detailed Autumn Statement on 17th November. Without wishing to fuel all of the uncertainty out there, I get the impression that we could see wider announcements and surprises ahead…?

Nevertheless, we can only plan for what we know now and it appears most likely that we will see the following:
• An increase in corporation tax for many companies from 19% to 25% from April 2023.
• The basic rate of income tax will remain at 20% indefinitely from April 2023 and for income above £150,000 it will remain at 45%, instead of the reductions previously announced.
• Whilst the NIC rate will reduce by 1.25%, dividend tax rates will retain the 1.25% increase, resulting in rates of 8.75%, 33.75% and 39.35% for basic rate, higher rate and additional rate taxpayers respectively.
• The annual investment allowance (providing 100% tax relief on allowable expenditure) will not reduce to £200,000 and will instead remain at £1m indefinitely.

I hope we will see generous allowances for investment, such as the 130% super deduction which is currently in place until 31 March 2023, and no scaling back of R&D tax relief.

Whenever there are significant tax changes, there are opportunities. For example:
• The timing of capital expenditure.
• Recognition of profits in specific accounting periods.
• Profit extraction.
• Timing of pension contributions to maximise tax relief.

Please feel free to get in touch if you’d like to discuss any of these areas and how they might impact you and your business.