Today’s Autumn statement resembled a tightrope walk – increasing income (taxes), cutting costs (the state) and improving the balance sheet (debt and interest) – all whilst inflation is rife, and economic growth has stalled. It felt as though the Government was sway-dancing on the tightrope to ‘Everybody Hurts’ (the 1992 REM classic and still a great song!) – whilst back on the ground, the UK GDP is still lower than post-Covid levels compared to the US GDP which is already up 4.2%.
The last budget tried to stimulate the ‘sick patient’ with tax cuts – but sadly, as soon became apparent, without showing how the balance sheet would add up to pay for the medicine. This budget comes with all the maths, however, bad the numbers sound (a 2-year recession) but is there still enough medicine to stimulate long-term recovery?
The key tax changes for our clients are:
- The lowering of the threshold for the top rate of income tax, which has dropped from £150,000 to £125,000 – this is expected to pull an additional 250,000 people into the top bracket.
- Increasing the national living wage by 9.7% – this means that the hourly rate will be £10.42 from April 2023.
- The Capital Gains Tax (“CGT”) Annual Exemption Allowance goes down from £12,300 to £6,000 next year and then to £3,000 from 2024. Not a big fund raiser as CGT is only worth circa 1.5% of Government receipts and there was NO MENTION OF BUSINESS ASSET TAPER RELIEF (previously entrepreneur’s relief), so hopefully, these allowances stay the same.
- Electric car tax VED from 2025.
- A significant change in the way R&D tax credits will work.
- A dividend allowance reduction from £2,000 eventually to £500.
- Business rates re-rating in 2023 to go ahead but with more reliefs.
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