Well, there is a budget on Wednesday 15th March. At this time, announcements and predictions will be made for the forthcoming year. We have been told not to expect any tax cuts and are already aware that there will be no movement in tax thresholds, indeed, the additional rate threshold is being reduced. This means that as people’s incomes increase, they may drift into a higher tax bracket. Their income above that threshold will then be subject to tax at a greater marginal rate. It could also mean some individuals, who pay no tax at the moment, starting to pay.
For companies, the rate of tax is increasing quite significantly. Currently, all limited companies pay tax at 19%, this is increasing to 25% from 1st April, although companies making less than £50,000 per annum will stay on the original rate.
This is a big hike and commentators fear that it could restrict innovation, as businesses will have less cash to invest. However, it’s also true to say that where that investment can be made in a tax-efficient way, the rate at which a business is saving tax will also be greater!
Can individuals and businesses do anything to mitigate these increases?
Well, pension payments remain highly tax efficient, with generous annual limits available for paying premiums.
For a limited period, the ‘super deduction’ allowance is still available for limited companies (to 31st March) and all businesses can continue to invest and claim 100% relief on certain plant and equipment up to £200,000 per annum going forward (£1m to 31st March). These are valuable allowances to all business owners.
As well as tax announcements, the budget will provide an update on the country’s finances and consider far-reaching forecasts for debt levels, growth levels and inflation figures.
These forecasts are crucial when the Chancellor and his team review the amounts of income (taxes) that they need to generate, so we must hope that by then, the outlook is a little better for the country. This may allow some slackening in taxation policy to help us all through these taxing times!