Sunshine from Sunak? Autumn Budget Reaction

A longer, and rather glossier, Budget summary is being prepared.  This will appear on our website early tomorrow I hope.  However, as watched Mr Sunak deliver the Budget I did reflect on how they have evolved over the years.  Many tax professionals share my disappointment that so much is leaked beforehand.  The drama of the red box is much more fun when you don’t know what is in it.

And what was in it for the tax profession?  Well, it may be more interesting to say what wasn’t in it.  There was no major change to Capital Gains Tax.  There was no major change to Inheritance Tax either.  This is curious as the Office of Tax Simplification carried out reviews in recent times for the Treasury and with covid and Brexit these appear to have been tossed in the bin.  So, for most of us, life is unchanged.  And the much rumoured notion of painful pension rule changes was once again just a rumour.

However, we must watch for things already announced.  At April 2022 the rate of tax on dividends goes up 1.25% , alongside the 1.25% social care levy – an increase in Employer’s and Employee’s National insurance.

For businesses and companies, we currently have 100% capital allowances for everything (£1m limit extended to March 2023), 130% allowances by way of a super deduction for some things in companies and excellent incentives to buy an electric company car.  All good.  These will all run to March 2023.  And a 19% corporation tax rate.  But in 2023 these all seem to end, with a 25% corporation tax rate too.  This, alongside the dividend/social care levy makes for a painful state of affairs for the owner managed business from 2023.

I was struck that the Chancellor made a pitch in his speech (just around 13.30 if interested in watching it – an hour in), explaining he believed the Government and taxpayer should not be the solution to every problem in society and that he wanted to lower taxes in this Parliament.  Well, it was an odd thing to say when he’s increasing taxes to spend spend spend!  And, I was struck that if 50% of GDP is now state generated and tax is a higher % of GDP than at any time since the 1950s, us taxpayers might reasonably ask why there is no obvious improvement in public services for all the extra taxes being paid.  It seems to me that we put more and more of GDP/income into public control and that education and health are said to be in a worse condition even ignoring the pandemic.

So, it seems the Chancellor wants to talk about tax cuts and a smaller Government whilst doing the very opposite (rightly or wrongly and I make no political observation there save for the comment above).  It’s like the chap who drinks and gambles and promises to stop soon.

In any case, tax professionals will be cheered to see that capital gains tax returns on the sale of properties which are not your tax free main residence are now to be submitted within 60, not 30, days of the disposal.

Of course there’s lots of “other stuff” in the Budget.  A consultation on changing alcohol duty (cheaper fizzy wine is the promise), changes to Tonnage tax, to some aspects of air passenger duty.  But mostly it is all for another time, another day and 2023 seemed a popular year for many changes announced today.

Kier Starmer had to withdraw from responding today due to Covid and whilst I wouldn’t wish him ill, it was the perfect Budget to miss.  A Budget where spending was generous and tax cuts few and far between.  Not rich pickings really for Labour, trying to offer a different future involving more taxation and a larger state – can we go much higher than 50% of GDP being state generated?  Time will tell.  I am sure it was 35% of something in 2017.  Clearly I need to go and read the detail.

In any case, another fairly forgettable Budget.  I can still remember my own involuntary gasp when Gordon Brown revealed the growing national debt figures after we brought in the tax credits system (Debt was well below 40% of GDP – and is now double that).  And Ken Clark’s cheery announcements about a penny off a pint.  Rose tinted glasses I’m sure.

In any case, do wait for the “glossy stuff”  – I’m sure I’ve missed something.

Donald Parbrook

Director, Milne Craig

 

 

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