2022 Autumn Budget – No surprises?
Following the turmoil of the Truss government with the appointment of Rishi Sunak as Prime Minister and Jeremy Hunt as Chancellor it was always expected that the running of government would be a smoother ride. The weeks leading up to today’s Budget have certainly been more ‘business as usual’ and today’s announcements did feel more measured.
It had been touted beforehand that we should be expecting tax increases and spending cuts. With this background in mind going into what was one of the longest Budget speeches in recent history, at 53 minutes, there were no real surprises.
It would be fair to say that from a tax increase perspective everyone is going to suffer some ‘pain’ in the coming years, not through an increase in any headline tax rates but generally through the freezing of all tax allowances. We already knew that some of the income tax allowances would be frozen until 2026 that has now been extended to 2028 and now encompasses all allowances, not just the personal allowance and higher rate thresholds but also all national insurance bands, so it hits employees as well as employers.
For investors and small business owners, the dividend tax free allowance of £2,000 will be halved in April 2023 and halved again in April 2024. This potentially brings more savers into the tax net but also erodes further some of the benefits of trading through a limited company when coupled with the already in place 1.25% increase on dividend tax rates compared to March 2022.
As seems tradition during this government there has been the expectation of increasing capital gains rates, loss of reliefs or pensions being hit. Again, pensions reliefs and allowances have not been touched and it could have been worse for capital gains tax changes. There has been no curtailing of any of the reliefs or change in rates, which is welcome news given changes in recent years. The sting in the tail though is the cutting of the capital gains allowance of £12,300 to £6,000 in April 2023 and to £3,000 in April 2024. With potentially increasing asset values and a need for some to start realising cash trapped in capital assets this could cause issues for some and also bring more people into the tax net each year.
For businesses, it was a relatively quiet Budget with the biggest impact coming through indirect changes. A 10.1% increase in the minimum wage to £10.42 from April 2023, while good news for employees comes at a cost to employers not only with the direct increase, but also factoring in the employers national insurance, will be putting increase cost pressures on businesses that seem to be seeing cost increases across the board.
One glimmer of light for business with premises is increased rates relief in some areas. For those claiming small business rates relief any increase in rates as a result of the revaluation of properties will be capped at £600 from April 2023. For those businesses in the Retail, Hospitality and Leisure sectors currently benefitting from 50% rates relief the relief will be increased to 75% from April 2023.
For any company claiming research and development relief there is good news for those large companies claimed under the RDEC scheme with a increase in the rate of relief from 13% to 20%. However, given the vast majority of claims are under the SME scheme it is bad news with relief being cut from 130% to 86% and the tax credit being cut from 14.5% to 10% from April 2023. How this fits with having innovation as one of the areas to focus on to achieve growth, we wait to see. It has also been confirmed that the previously announced reforms to tighten up claims will be legislated from in 2023.
Whilst it was definitely not a Budget with any surprises and was certainly not a giveaway Budget, many have come away thinking, it could have been worse, and it has at least given businesses what they have been looking for in terms of some certainty to be able to plan for what we can all agree is likely to be a difficult couple of years ahead.