Today’s Budget announcement covered a lot of ground and set out the Governments direction of economic travel for the next 3 years. However from a tax perspective, the Budget Speech did not contain much in the way of change. Indeed most of the main changes that will take effect over the next 18 months had already been previously announced, or to the annoyance of the Speaker of the House of Commons, already leaked/briefed to journalists.
There was no changes announced to income tax rates or allowances, which given that the personal allowance relief and tax bands are not going to increase, means an effective tax rise for all tax payers in these inflationary times. The increase of 1.25% in national insurance rates and dividend tax rates had already been announced and will take effect from next April. The corporation tax rate will remain at 19% until March 2023 and then, as previously announced, will rise to 25%. There were several technical announcements that will apply to banks, internet retail giants and REITS but these will have little impact on most corporates. However there was a welcome extension to the Annual Investment Allowance limit of £1m until 31 March 2023 to help companies investing in plant and machinery. There was also the announcement that very large residential house builders will have to pay an extra 4% tax on profits in excess of £25m, which is only going to apply to the largest of house builders.
Surprisingly the chancellor left capital gains tax and inheritance tax almost completely untouched with tax rates and existing reliefs remaining as they were before he stood up to speak. This means that Business Asset Disposal Relief will remain for the first £1m of capital gains on the sale of shares in trading companies, if the qualifying conditions are met, and also that inheritance tax business property relief will continue to apply at 100% on the transfer of unquoted shares in trading groups and companies. Indeed the feared removal of the capital gains uplift on death did not happen nor was there a reduction or removal of the capital gains annual exemption which remains at £12,300. Those who are expecting to realise a capital gain in the short term may be breathing a sigh of relief.
There was yet more legislation announced to clamp down on those who promote tax avoidance schemes and there will be a requirement for large businesses to notify HMRC if they take a tax position in their financial statements that is either uncertain or contrary to HMRC’s known interpretation. There will also be reform of the research and development tax credit regime for companies to include expenditure on data and cloud costs but on the other hand to focus (limit) the relief to expenditure incurred in the UK. There were no changes to the rates of VAT.
All in all from a tax perspective, this budget will not go down as a show stopper or even being that memorable. However, given that it did not introduce changes to the capital gains tax or inheritance tax regimes, business owners may be forgiven for being pleased with today’s announcements.