A Brutal But Balanced Budget

The Chancellor Jeremy Hunt’s recent Autumn budget has been described by some as ‘brutal’ if intended to restore economic stability. He announced further measures (beyond October’s ‘leakages’) in an attempt to rebuild the economy, while balancing the urgency to deal with other challenges, such as the cost of living and the energy crisis.

The key headlines relevant to businesses include:

National Living Wage

The NLW is to rise 9.7% from £9.50 to £10.42 an hour from April 2023. While good news for low paid workers, it will increase financial pressures on businesses who are being squeezed in all directions.

Corporation Tax

The rate of corporation tax will now rise from 19 per cent to 25 per cent in April 2023.

Windfall Tax

The energy profits levy on oil and gas firms will rise from 25% to 35% from 1 January 2023 until March 2028. A new temporary 45% levy on electricity generator will also be effective from 1 January.

Capital Gains

The annual CGT exemption will drop from £12,300 down to £6,000 in April 2023, and to £3,000 from April 2024.

Dividends

The dividend allowance will be cut from £2,000 to £1,000 in April 2023, then to £500 from April 2024.

Business Rates

The chancellor said that almost two thirds of commercial properties will not pay more business rates next year. In a particularly welcome boost to the high street, a new transitional business relief scheme is to be introduced. This will limit bill increases resulting from changes in rateable values which come into effect from April 2023. Bill increases for the smallest properties will be limited to 5%.

The business rates multiplier is to be frozen at 49.9p for small business and 51.2p for standard size business) from April 2023.

In addition, relief for 230,000 businesses across retail, hospitality and leisure will go up to 75% from 50% next year.

IR35

It still appears that the IR35 (off-payroll) reforms will not be reversed as originally planned. They were due to be repealed next April, but the chancellor said in October that this would not now happen – and he did not mention IR35 in the Autumn Statement.

For now, clients will continue to have to determine IR15 status in discussion with the businesses concerned.

Energy Bills

The Energy Bill Relief Scheme for businesses began on 1 October and will now last until April, followed by a more targeted scheme which will, said Hunt, “ will better incentivise energy efficiency”. More information is awaited.

R&D

Amid reports of abuse and fraud in R&D tax relief for SMEs, the deduction rate for the scheme is cut to 86% and the credit rate to 10%. The rate of the separate R&D expenditure credit is increased from 13% to 20%. A consultation will be held with industry on what further support R&D intensive SMEs may need.

If you would like us to cover an issue in the next NGM Tax Law Newsletter, we would be pleased to hear from you