Commentary on National Insurance from Stevie Heafford
“As predicted, the new Chancellor has reversed the 1.25% rise in National Insurance Contributions originally introduced by Rishi Sunak back in April. What is less expected is that these changes will come into effect from 6 November. While this is a speedy turnaround in policy, the overall impact is minimal. For someone earning £100k, the annual saving will be £1,092, however for someone earning £27,000, the saving will be £180 each year.
The Chancellor should address the bigger question here – the increase in National Insurance was intended to fund social care policies, where will the funds for that come from now? Expect to see potential increases elsewhere.”
Commentary on Stamp Duty from Tim Walford-Fitzgerald
“The Chancellor is expected to announce a cut in Stamp Duty Land Tax tomorrow to help bolster the UK property market and to better support first time buyers looking to get on the property ladder.
Questions you should be asking:
A 1% cut to Stamp Duty Land Tax would equate to a cost saving of £1750 on the average £300,000 UK property – this is because there is no duty payable on the first £125,000. This £125,000 band has remained unaltered – except for short lived periods such as during the pandemic – since the progressive system was introduced in 2014. In that time, the house price index has risen by more than half.
It’s easy for the budget to blind the average consumer with numbers. The bigger challenge for homebuyers will be interest rates. For example, an 0.75% increase in interest rates would add over £1,250 to the yearly costs of servicing a £200,000 mortgage on that property. This is a rise that many won’t be able to afford.
Our message to the Chancellor is: don’t forget landlords. Increased interest rates will increase the costs for buy to let or those who inherit and choose to keep their property (but borrow to pay the IHT or renovate it). For these individuals, they are liable for any higher rate tax on their mortgage interest despite having paid that interest over to banks. That additional cost will lead to some property investments becoming unviable to keep at current rents. The consequence ultimately will mean increased costs passed on to individuals renting.”
Commentary on VAT from Gerry Myton
“A reduction in the standard rate of VAT from 20% to 15% could be on the cards tomorrow. This could encourage greater discretionary spending – but will companies pass on this rate reduction to their customers, or will they keep it as additional profit?
There could be potential for a special rate for the hotel and entertainment sector to boost tourism. In that case, we would be following in the footsteps of other countries, such as Republic of Ireland, who already have similar schemes in place.
The Chancellor could also take advantage of the fact that the post-Brexit UK is now ‘free’ to set its own VAT rates. For example, he could extend the scope of where the 5% rate applies, or bring items that are subject to 5% – such as domestic fuel – down to 0%.”
Commentary on Corporation Tax from Toby Ryland
“We are expecting – as heavily trailed by the new Prime Minister – that the planned increase in corporation tax from 19% to 25% – due to come into effect in April 2023 – will be scrapped.
This will be welcome news to businesses which are already facing the uncertainty of inflationary pressures and fuel cost increases. It will also help to maintain the UK’s status as a low tax jurisdiction which makes it attractive to inward investors.
We hope to see the more complex associated companies rules that were due to be introduced alongside the higher tax rate to also be scrapped.
Finally, this is a perfect opportunity for the Chancellor to reconsider the more restrictive rules surrounding R&D tax relief that are due to be introduced in Spring 2023 – which could easily drive R&D activity and the development of intellectual property away from the UK.”
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