On the 17th of November the new Chancellor Mr Hunt, gave an autumn budget speech. It was widely feared as there were rumours of nasty rises in taxes due. My biggest fear is that they would restrict relief on pension contributions or bring CGT rates in line with income tax.
The good news is my biggest fears didn’t come true. What happened was many allowances and tax bands were frozen to 2028 and the government are going to increase their tax collection through the back door in effect.
Even though there were two major changes to the capital gains tax free allowance and the dividend allowance, I believe that inflation, the freezing of the vat registration threshold and the raising of the national minimum wage to £10.42 are much larger issues for a business owner.
My advice is to keep an eye on your profit margins, Gross, and Net to make sure your sales prices are keeping up with the cost of delivering your services. This is a simple management system that isn’t time onerous but allows you to plan.
- No change: the VAT Registration and Deregistration thresholds will not change for a further period of 2 years from 1 April 2024.
I believe this to a large issue for small businesses that are not currently vat registered. If you are vat registered already you can skip this paragraph. Where a business exceeds the vat threshold HMRC will want to charge as if a business was vat registered. Each year I see at least two small sole traders or Ltds must write out cheques for 10K plus where they breached the vat threshold but didn’t have the systems or knowledge to identify this fact at that time.
With costs increasing, sales prices will increase. The 85K limit will be breached by many small businesses by March 2025, and a whole new raft of businesses will have to deal with vat compliance.
Capital Gains tax allowance
- From April 2023, the CGT Annual Exempt Amount reduces from £12,300 to £6,000.
- From April 2024, the allowance permanently reduces from £6,000 to £3,000 for individuals and personal representatives.
- From 2024-25 it will be permanently fixed at £1,500 for most trustees.
- The proceeds reporting limit for CGT is fixed at £50,000 from April 2023.
While the reduction in the CGT band from £12,300 to £3000 is irritating, its not going to make a material impact to any retirement or business plans. The biggest effect will be seen by residential property investors. Where the £9,300 reduction in the 0% band will cost £2,604 additional CGT on a property disposal at 28%.
- From April 2023 the dividend allowance reduces from £2,000 to £1,000.
- From April 2024 the allowance reduces from £1,000 to £500.
The dividend allowance charge will affect most of our clients. It’s a £1,500 drop in allowance at 0%, which will be replaced by the basic rate band £8.75%. Therefore this will cost Ltd Company shareholders an additional £131.75 per year.
Irritating but not life changing.
National Minimum Wage Rise
- Individuals aged 23 and over: £10.42 per hour
Currently the minimum wages I £9.50, this represents a 9.6% increase roughly in line with inflation.
I feel this change need mentioning for businesses that currently employ a lot of minimum wage staff, I am thinking the hospitality sector mostly. It will be important for these sector to consider sale price increases to cover the additional staff costs. Calculations should be completed now to look at how this will impact your budget for next year.
Company Car Tax (CCT) Rates
Rates are set for company Car Tax until April 2028:
- Appropriate percentages for electric and ultra-low emission cars emitting less than 75g of CO2 per kilometre will increase by one percentage point from 2025-26 to 2027-28 to a maximum appropriate percentage of 5% for electric cars and 21% for ultra-low emission cars
- Rates for all other vehicles bands will be increased by one percentage point per year to a maximum appropriate percentage of 37% and will then be fixed in 2026-27 and 2027-28
Where we have advised on electric cars, these wills till be tax efficient. We will reconsider electric cars as profit extraction tools in 2028.
VED on Electric Vehicles (VED)
From April 2025, electric cars, vans and motorcycles will begin to pay VED in the same way as petrol and diesel vehicles, this measure will apply to cars, vans, motorcycles and tricycles.
New zero-emission cars registered on or after 1 April 2025 will be liable to pay the expensive car supplement where eligible (currently those with a list price of or exceeding £40,000 are liable).
Freeze of tax rates
What this means:
Several taxes have had their bands frozen until 2028 but there has been no increase in the rate of tax collected. If a rate was increased and we had to pay 25% income tax rather than 20% income tax there would be a riot, but with this method you don’t really feel the extra tax collected.
Taxes with bands frozen
NICs (Employers) Secondary NICs
No changes to rates or thresholds:
The Secondary Threshold is fixed at £9,100 until April 2028 and the Employers’ NICs allowance is unchanged
The Inheritance Tax nil-rate bands are fixed until April 2028.
The nil-rate band remains £325,000, the residence nil-rate band remains £175,000, and the residence nil-rate band taper continue to start at £2 million.
Stamp Duty Land Tax
The changes made on 23 September 2022 (the Kwasi budget) remain unchanged:
An increase to the nil-rate threshold of Stamp Duty Land Tax (SDLT) from £125,000 to £250,000 for all purchasers of residential property in England and Northern Ireland.
An increased nil-rate threshold paid by first-time buyers from £300,000 to £425,000.
The maximum purchase price for which First Time Buyers’ Relief can be claimed was increased from £500,000 to £625,000.
Share this Story