Despite all we were hearing in the run up to today’s Budget, the Chancellor has announced very little in the way of tax changes.
Even the most significant of changes – an increase in Corporation Tax from 19% to 25% – doesn’t come for another 2 years. When it does kick in, it applies in full to companies making profits in excess of £250k (and those making less than £50k will remain at the existing 19%). This is a reintroduction of a “main” rate and a small-profits rate that was scrapped a few years ago and we will be carefully assessing what our clients can do to mitigate this impact.
For the rest of us, personal income taxes and allowances are frozen until 2026. Pension limits and Inheritance tax thresholds are also frozen. Notwithstanding the underlying inflationary concerns, this is certainly a stealth tax but does stick to the manifesto pledge not to raise Income Taxes.
The VAT registration threshold is fixed at £85k and cuts for the hospitality sector have been extended.
In what is much less of a surprise than it would have been three months ago, there was no mention of an increase in Capital Gains Tax rates or allowances. Entrepreneurs’ Relief (sorry – Business Asset Disposal Relief) remains unchanged. At least until the Autumn.
Similarly, the long rumoured IHT changes were noticeable by their absence and the Chancellor resisted any Wealth Taxes.
With only the top 10% of companies expecting to pay the new 25% CT rate and with spending far exceeding tax rises, one has to wonder how the Government plans to pay for Covid as this Budget doesn’t appear to contain the answer. We wait with bated breath for the Autumn Statement.
Should I still be using a company?
With the only pertinent rise being in Corporation Tax, the obvious question is should you still be operating via a company?
The short answer is yes. The benefits having a company gave you before still apply. The savings come from the flexibility that companies afford and not the small difference in tax rates.
Not yet incorporated? You probably should be. Ask us how.
