With the economy stagnant and following Kwasi Kwarteng’s mini-Budget, major stumble in September, Jeremy Hunt today presented a slow and steady budget that aims to trim inflation whilst boosting productivity and growth. But will it work? The key changes for businesses are:
- Corporation Tax (“CT”): As previously announced this increases from 1 April 2023 When companies will pay 19% on the first £50,000, 26.5% up to £250,000, and then 25% on all amounts over £250,000. The ratchet in effect creates a flat 25% rate for all companies that make over £250,000.
- Capital Allowances: As many predicted, the current Super-deduction offset for business investment is to be extended for 3 years and potentially become permanent. This lowers the effective rate of CT to create an investment incentive. It is calculated that this will cut £9 billion off the CT increase.
- Investment Zones: There will be 12 new, low-tax “investment zones” with £80 million allocated per zone in a bid to kickstart the UK’s stalling economy and help “level-up” areas.
- Pensions: in an interesting move that may help reduce our clients’ CT bills is the increase in the annual pensions allowance from £40,000 to £60,000. It’s also aimed at trying to encourage some of the 50-plus, great retirement employees back to work. The Chancellor has also uncapped the lifetime pension allowance, currently set at £1.07 million, which again opens the scope for more significant pension planning by entrepreneurs.
- Capital Gains Tax (“CGT”): Of key importance for M&A, CGT seems to have avoided any changes. If you sell 51% plus of your shares to an employee ownership trust, there is 0% CGT tax. Otherwise, the rate is 20% on the sale of shares, reduced by business asset disposal relief to 10% on the first £1 million per executive shareholder who has held shares for more than 2 years.
The forecast for inflation to fall to 2.9% is a big reduction which could even lead to deflation in 2024 – one to watch, as is the forecast that we will not now see a recession this year, which could be good news.
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