Yesterday the Chancellor, Jeremy Hunt, presented his budget to parliament. The Chancellor set out that the budget focused on three key priorities – regaining stability, growth and protecting our public services.
He explained that inflation is the enemy and that he is focused on reducing inflation, which he will do by increasing taxes and gaining efficiencies in public spending in equal measures.
Please see below for the key changes which could possibly impact you;
- The dividend allowance is being cut to £1,000 from April 2023 and £500 from April 2024. Currently this allowance is £2,000 and will mean that you will pay more tax on dividends received.
- The Capital Gains Tax annual exemption is being cut to £6,000 from April 2023 and £3,000 in April 2024. This is currently £12,300. This means that more of the gain will be taxed – for residential property sales this will have the effect of increasing Capital Gains Tax by around £2.6k.
- The higher rate threshold, which is when income tax is charged at 45%, is reducing from £150,000 to £125,140 from April 2023. For somebody earning in excess of £150,000, this will cost them an additional £1,243 in tax.
- The personal allowance, higher rate threshold, NIC thresholds and Inheritance Tax thresholds will be frozen until April 2028. This is a “stealth tax” which will result in many more people paying higher rates of tax as their income rises with inflation.
- There was no mention of Corporation Tax in the budget, however this has previously been confirmed to be rising to 25% (from 19%) from April 2023. There will be relief for smaller businesses, meaning those with profits below £50,000 will continue to pay 19%, and those with profits between £50k and £250k will pay between 19% and 25% depending on the level of profits. This change impacts groups of companies – meaning it is important to review the group as a whole and not each individual business.
- Electric vehicles will need to pay Vehicle Excise Duty, also known as road tax, from 2025.
- Company electric vehicles will continue to benefit from more generous taxation however will begin to increase from 2025.
- Stamp duty cuts will remain in place until 31 March 2025.
- R&D tax relief for small and medium businesses is being cut to 86% from 130%, and the R&D tax credit available is being cut to 10%.
- The National Living Wage is increasing to £10.42 from £9.50 – this is the largest ever increase.
- The Energy Price Cap Guarantee, set at £2,500 for the average household, will remain until April 2023. It will then increase to £3,000 for a further 12 months. This will increase the cost of energy for the average household by £500 per annum.
- There will be an additional cost of living payment to the most vulnerable, which will be £900 for households on means tested benefits, £300 to pensioners and £150 to people with disabilities.
- Business properties will be revalued for business rates purposes from April 2023, but there will be £14bn of tax cuts which will result in 2/3 of properties not paying more – aimed to protect smaller businesses including pubs and restaurants.
- Benefits and pensions will all increase with inflation at a rate of 10.1%.
- There is a cap on the increase for social rents of 7% per annum.
- The Energy Profits Levy on oil and gas companies will increase from 25% to 35% until March 2028.
- The capital spending budget will not be cut meaning the government will continue to invest the same in our infrastructure, including HS2.
- There will be a new nuclear powerplant created at Sizewell C which will aim to reduce our energy crisis and will result in us generating more energy.
- The Chancellor also announced changes to public spending, with increases in education and NHS spending. All other departments will not receive any cash cuts, but will be expected to operate more efficiently to support the government’s mission of fiscal discipline.
If you would like further assistance or clarification on what the above changes mean to you, please do get in contact with your client manager who will be happy to assist.