As anticipated due to the economic deficit, Jeremy Hunt today announced measures that will see tax increases amounting to a cost to taxpayers of tens of millions of pounds. Only time will tell whether his planned changes will be successful in reducing the UK debt burden without deepening the risks of a longer recession.
The Chancellor remained within the commitment to the “triple lock” by not increasing tax rates, but as widely predicted he froze or reduced tax allowances and thresholds, including the personal tax allowance, the threshold for the top rate of income tax, and the capital gains tax allowance. These decisions mean that many more taxpayers will fall into higher tax bands than before, reducing the real value of income after tax. The Chancellor also shocked users of electric vehicles by announcing that these will no longer be exempt from vehicle excise duty from 2025.
For businesses, with the increase in the corporation tax rate to 25% already announced, the value of research and development tax reliefs was also scaled back, especially for smaller and medium-sized businesses.
There was a little positive news for those on lower incomes, with the National Living Wage set to increase to £10.42, and welcomed confirmation for some of the most vulnerable members of society in that the state pension, benefits and tax credits will rise in line with inflation by some 10.1%.
VAT was largely left untouched, and we await more information surrounding news of removing import taxes on a list of over 100 goods.
It was always inevitable that the credit card bill for the financial support given to businesses and working people to help get us through Covid would have to be met before long. It is especially challenging that this coincides with the energy cost crisis and wider cost of living pressures being faced. It is to be hoped that the resilience of British business will drive a successful period of growth as the economic pressures hopefully ease.
If you would like to talk through how these announcements affect you and your business, then please get in touch.
