In order for the Government to plug an anticipated £55 billion hole in public finances, (half of which are to be paid for by tax rises) the Prime Minister and Chancellor had already “agreed on the principle that those with the broadest shoulder should be asked to bear the greatest burden”.
How will it affect you?
The dominant theme of the statement for personal finances was the extended freezing of various allowances (namely income tax and inheritance tax) beyond which taxes are levied-the impact of this, of course, is that more people will be dragged into paying the 40 per cent higher-rate income tax bracket, and many more will start paying income tax for the first time.
For businesses, the formerly announced increase in the rate of mainstream corporation tax will have an impact, however, for smaller companies, with marginal profits, efficient tax planning can help to maintain the small companies rate of corporation tax at 19%.
The chancellor has also looked to Investors and shareholders to bear the additional tax burden who will also feel the impact with the reduction in the annual capital gains tax allowance and dividend allowance.
This Autumn Statement and last month’s reversal of the measures announced in the Growth Plan mean that everyone is paying more tax, but this is especially true of contractors and the self-employed. Due to the structure of their businesses, independent contractors are particularly hit by today’s cut to dividend allowances and the previously announced increase in corporation tax rates.
This is short-sighted. The economy needs flexible talent to support growth, including the infrastructure and energy independence projects that the Chancellor has prioritised. Contractors are available to work as and when their skills are required, and the personal risks associated with this flexibility should be reflected in the tax system.
Some may decide to seek permanent employment as a result of this budget, but contracting is not just about the money; it is a flexible lifestyle choice. If the Government is not going to incentivise the flexible workforce, businesses need to consider what else they can do to continue to make it an attractive option. This might include access to improved services or benefits, in compliance with the off-payroll working rules.
The Chancellor advised the aim of the Autumn Budget was to encourage “Stability, Growth and Public Services”.
Key points to take away as follows for individuals:
- Those earning more than £125,140 to pay income tax at the additional rate of 45%. This was previously triggered only for those earning £150k plus;
- Tax free dividend allowance reduced to £1,000 from £2,000;
- Annual capital gains allowance reduced from £12,300 to £6,000;
- Income tax and National Insurance bands will remain fixed until April 2028.
It is unsurprising that the key take-away from the Autumn Budget is the requirement of businesses and individuals to contribute to the tax shortfall in equal measure. More than ever, Brookson can assist with ensuring that you maximise income and reliefs to full effect as a result of these budgetary changes.