We were proud to be able to send you all very shortly after the now infamous “mini-budget” a summary of the changes that were supposed to be brought in after than now infamous speech. Our advice at the time was to “fill your boots while it lasted” as it promised a big tax giveaway – little did we know what would then ensue and now of course that legislation has been reversed with the exception of the National Insurance reduction.
The new budget statement will be on 17 November and the following Wednesday we will send out a new summary based on what should then be the definitive legislation. Most people accept that tax rises are inevitable given the events of the past few years but the press speculation is that the main increase in tax will fall squarely on the commercial sector. The originally intended increase in corporation tax from 19% to 25% now seems certain to go ahead. This will effectively mean that corporation tax will increase by 30% from April 2023. We now understand that the Chancellor is also targeting dividend income although we do not yet know exactly what that format will take – it may be just a reduction in the tax-free dividend threshold which would not be unduly onerous but it may also mean an increase in the rate of tax applicable to dividends and it should be remembered that there was no additional tax on dividends at all until 2016.
When there used to be a different rate of tax for large companies as opposed to small companies, the threshold for the lower rate was £300,000. It seems likely that the threshold for small companies from now on will be only £50,000.
Our editorial comment is that the government seems unable to distinguishing between huge multinational companies quoted on the stock exchange and small family businesses, treating them all the same for tax purposes. If these rises do come into being, it may be appropriate to hold over any large items of expenditure such as one-off pension contributions or capital expenditure until the rate rise has taken place in order to get better value as it were, for such expenditure.
We won’t know for certain of course until next week and we will make sure, when the actual legislation is published, that you are fully informed.