This year we are not sending out a detailed commentary on the annual budget because most of it had been leaked in the Press beforehand anyway and there is not a huge impact to tax rates, other than the previously announced increase to Corporation Tax from 19% to 25%. We nonetheless have pleasure in attaching a tax card setting out the rates in force for the new tax year.
It would seem that the Government is asking businesses to facilitate growth and at the same time kicking them in the teeth by increasing their Corporation Tax rates by 30%.
Successful businesses which are able to pay their owners income of more than £50,000 will effectively be paying tax at over 60% on that income as opposed to their employees who will be paying 42% on the same level of income. We believe that this budget was disappointing and uninspiring and particularly for small and medium size businesses, previously when there were two different rates of Corporation Tax, the starting point for the higher rate was £300,000, which with inflation would equate to round about £400,000 these days – it is now £50,000.
On a positive note, and to replace the Super Deduction, companies will be able to claim 100% relief on qualifying capital expenditure without any cap. However, for many family-owned businesses the £1 million Annual Investment Allowance provided this relief already.
Reduced paperwork for international traders and longer time to submit customs forms will be welcomed by many. The new investment zones may provide for some interesting opportunities, albeit they may be fairly niche.
The tax changes made, whilst few in number, are quite significant – in particular pensions, R&D and capital allowances.
The lifetime allowance for pensions – previously £1.07M – was abolished but there is still an annual allowance limitation, albeit it at the higher level of £60,000 per year compared to £40,000 previously.