As the country emerges from the COVID crisis, Chancellor Rishi Sunak announced in his Budget today real terms increases in spending for all departments and some tax changes.
The Chancellor attempted to paint a positive picture for the future, with increased spending over this Parliament of £150bn and support for a greener growing economy.
The tax reliefs announced include:
- Extension of the £1m Annual Investment Allowance to March 2023, although the benefit is limited by the super deduction for capital allowances to 31st March 2023 as previously announced;
- Review of business rates with an initial 50% discount for businesses in the retail, leisure and hospitality sectors in 2022/23;
- Extension starting today on CGT payment on the sale of residential property from 30 days to 60 days;
- Fuel duty is frozen;
- Alcohol duties are frozen;
- New lower Air Passenger Duty for domestic flights from April 2023.
There will be a review of the R&D credit regime to expand the qualifying costs to reflect modern research techniques while restricting relief on costs arising in the UK only. These changes will come into effect from April 2023.
It was also confirmed that the self-employed and partnerships will be taxed on the profits or losses arising in the tax year. This will apply from 6th April 2024 with a transition in 2023/24. As profits are accelerated, this could result in increased income tax liabilities in 2023/24.
In addition to these tax measures, the Chancellor also announced support for those on the lowest incomes:
Increase of the National Living Wage to £9.50 per hour from April;
The Universal Credit Taper is to be reduced from 63% to 55% by 1st December at the latest.
The Chancellor had previously announced plans to raise taxes to protect the Exchequer, fund investment and support the NHS and Social Care, including:
- Increasing the rate of Corporation Tax to 25% from 1st April 2023 for companies with profits over £250,000, while for companies with profits up to £50,000 the Corporation Tax rate will continue at 19%. There will be a tapered rate between these two profit levels;
- Increases in National Insurance of 1.25% for employers, employees and the self-employed from April 2022;
- An increase of 1.25% on the taxation of dividends from April 2022;
- The freezing of personal allowances and income tax rate bands for 6th April 2022 to 5th April 2026;
- The thresholds and bands for Pensions, VAT, Capital Gains Tax and Inheritance Tax will remain unchanged.
This was a Budget that focused on growing and investing in the economy with support for the lowest paid in society. However, the burden to pay for this falls on businesses who will have to pay increased National Insurance and National Living Wage costs from April 2022, higher Corporation Tax Rates from April 2023 and the potential acceleration of income tax liabilities for the self-employed and partnerships in 2023/24.
The Chancellor stated that people should keep more of what they earn, and he aims to reduce taxes before the end of this Parliament, so in time for the next General Election!
If you would like to understand how this affects you, please speak to your local partner on 0330 088 7111.