Budget Update

Here is our take on the Chancellor’s new budget which raises taxes and reverses most, if not all of the Truss Budget. 

The leaked and previously announced tax increases are still going ahead…

• Corporation tax from April 1 2023 to increase to 25% for companies with profits over £250,000. Companies with profits under £50,000 will be taxed at 19%. Companies with profits between £50,000 and £250,000 will be taxed between 19% and 25%.

• Income tax and National Insurance contributions thresholds are staying the same until April 2028.

• The Upper rate tax band threshold will be lowered from £150,000 to £125,140 from 6th April 2023.

The Budget also announced:

• The National Living Wage will increase by 9.1% for individuals over 23 to £10.42 and the National Minimum Wage rates are all increasing by 9-10%.

• The dividend allowance is being reduced from £2,000 to £1,000 in April 2023, then to £500 in April 2024.

• The Capital Gains Tax Annual Exempt amount is being reduced from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.

• The National Insurance Secondary Threshold, i.e. the level at which employers start to pay Class 1 Secondary NICs for their employees, will be £9,100 from April 2023 until April 2028.

• The R&D tax relief is changing from 130% to 86% and the SME credit rate will decrease from 14.5% to 10%. This takes effect from the Autumn Finance Bill 2022.

• From April 1st 2023 business rates will be reevaluated to take account of a rise in property values since 2017.

Inevitably the Chancellor has decided that electric vehicles need to now pay road tax. This means that:

• Electric cars and vans will now pay road tax from 2025.

• New electric cars registered in 2025 will pay £10 in road tax for the first year then move to the standard rate.

• Existing electric cars will pay the standard rate from 2025.

• The exemption for electric cars for the expensive car supplement has also been removed. This means electric cars costing over £40,000 will pay an (at current rates) extra £355 per year on top of the normal road tax of £165 per year.

• P11d benefit in kind tax for electric cars is going up to 5% by 2027/2028, with an increase of 1% per year taking effect in 2025/2026 until the 5% level is reached in 2027/2028.

• However the 100% first-year allowance for electric vehicle charging points remains. 

There was little cheer in any of the above for small business owners who seem to have born the brunt of the tax increases. However we did also learn:

• There will be no introduction of a possible Online Sales Tax.

• The business rates multipliers will be frozen in 2023-24 at 49.9p and 51.2p. 

• There is a transitional relief scheme for business rates to support the changes in business rates from the reevaluation in 2023.

• There may be more energy price support for business announced in the Spring Budget.

• The reversing of the increase in National Insurance rates for employees (that started in Nov 2022) is still going ahead.

• There is still the £5000 National Insurance Allowance for small business owners.