Yesterday saw yet another Budget Speech in 2022 (hopefully the last!) and in the run up to it, the press rumours suggested significant tax changes and increases could have been announced.
Now that the information is out, although tax increases are coming and some will impact much of the population, whilst others are more targeted, including increases for businesses/companies, we have not seen sweeping changes across all taxes. Could that mean they are being saved for Spring 2023 … time will tell.
Individuals may typically see annual rises of at least a few hundred pounds, but somewhat more, for higher earners and those with investments.
Businesses operating as limited companies may see the most significant rises, with the already announced (then cancelled, and then reinstated!) increase in the rate of corporation tax – which will see the current flat rate of 19% replaced with a range of rates from 19%-25%, as well as a potential reduction in the level of Research & Development Tax Relief.
We’ve added a link to our full budget summary below. A few key areas to look for are:
Various tax allowances/exemptions are being cut over the next couple of years, eg freeze to the Personal Allowance, staggered withdrawal of Dividend Tax Allowance and reduction of Capital Gains Tax Annual Exemption. For most individuals, those tax increases are not going to cost tens of thousands but will see people’s overall tax bills increase year on year.
The limit at which the Additional Higher Rate of income Tax starts to be charged (being an extra 5%) was reduced from £150,000 to £125,000 – so people in that bracket will be looking at how to tax efficiently arrange the income they withdraw from their businesses eg salaries, dividends, pension contributions, tax efficient benefits in kind and directors loan account drawdowns, with similar considerations for profitable partnerships and the self-employed, landlords and those with significant levels of pension/investment income.
Reductions to R&D Tax Relief – in particular, for small and medium sized companies, the rate of the additional deduction is being reduced from 130% to 86%. So, the impact of that will need forecasting, as well as ensuring that companies with R&D activities identify the full extent of their costs and all relevant projects, in order to make the most of their potential claims.
Investment Zones. The Government appear to have committed to the introduction of Investment Zones in some areas of the country, but it seems that may no longer include Teesside. Further details are to be made available by Spring 2023, so it is worth watching that space, because businesses located in the chosen areas may be entitled to certain additional tax breaks.
Electric cars. They appear to remain just about as tax efficient as before the Budget, though we will see the annual Benefit in Kind (on which Income Tax/NIC is charged) start to increase by 1% per annum over the next few years.
Our full details summary, which can be found here, also includes confirmation of changes that were previously announced, including those that were temporarily withdrawn and then reinstated.
We hope you find this information useful, and would ask you to contact George Hardey, Paul Buckley, or Tom Bleasdale, if you would like to discuss any aspects in further detail.
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