The owner of an award-winning accountancy company believes that the Autumn budget is fair, given the huge task the Government has in turning around the UK’s economy.
Bev Wakefield, business champion and owner of Derby-based Vibrant Accountancy, says that this was a welcome statement in comparison to what we were led to believe but warned that there will be tough times ahead.
Key points for small businesses include personal allowance being frozen until 2028, a reduction in the additional income tax rate threshold and an increase in the national living wage. The Treasury says that this will mean more than two million people in the UK will receive a pay increase – something which will be much-needed after the Office for National Statistics’ latest figures show that 49% of adults living in the UK reported feeling unsure (very or fairly) of the future.
Bev Wakefield, Vibrant Accountancy.
“We have already had a chaotic few months under the government and I hoped that the Autumn statement was going to be kind to SMEs,” said Bev.
“They make up 61 per cent of UK jobs and Derby, a city with a rich history of innovation, is ranked the third-best in the country if you want to work for a SME, according to online business lender IWOKA.
“The budget needed to be balanced at a time when confidence is at an all-time low and the economy is shrinking. Government flagged that they were going to be tough and, balancing all things, this budget was a welcome Autumn statement in comparison of what we were led to believe.
“Personal taxes that were abolished by Liz Truss have been reinstated but that higher rate band has now been reduced,” said Bev, “it used to mean that individuals spending over £150,000 were taxed at 45p for employment or self-employment and taxed at 39.35% next year for dividend income.
“Now that £150,000 has been reduced to £125,140; this is the amount once you’ve lost every penny of your personal allowance. You lose your personal allowance when you go over £100,000 so for every £2 you go over, you lose £1 of your personal allowance.
“That now means that for those earning over £125,140, they will be taxed at 45p instead of 40p.
“Whilst there hasn’t been any other cuts made, personal thresholds have been maintained until April 2025. This means that it’s a clear attempt to avoid some of these political decisions being framed as tax rises, instead by keeping these frozen as our income rises in line with inflation it does mean that our pay will go up and they will collect more tax, which is how they’re going to raise tax.
“Regarding dividend allowance – we deal with a lot of small businesses, so this will affect them – the first £2,000 is currently tax-free but that will reduce from April 2023 to £1,000, and from April 2024 the free bit is only £500.
“That means that, as a business owner taking £50,000 of dividends and salary, this will cost you a £337.50 extra next and a further £506.25 the year after.”
There are expected changes to capital gains tax while there is a boost for owners of electric cars with an increase in benefit-in-kind tax.
Bev added: “The Government are increasing the benefit in kind tax rate on electric vehicles by an extra percentage point over the next two years as we all look at ways in helping the planet and cutting emissions. This will rise from 2% to 3% and then another 1% each year for three years.
“There’s no change to corporation tax. We will see a marginal rate come back, which means that the first £50,000 will be taxed at 19%. There will be a marginal rate from, say if you earn profits from £50,000 to £250,000 that will be taxed at 26.5% and anything over this will be taxed at 25%.
“For example, if you have profits of £100,000, you’ll be taxed on the first £50,000 at 19% and the next slice will be taxed at 26.5% rate, so that’s £13,250. Overall on £100,000 you will be paying £22,750 – that’s a rate of 22.75% corporation tax and not 25% in total.
“Ther are no changes to VAT registration and de-registration threshold for next two years, inheritance tax will stay the same until April 2028 and the stamp duty land tax that was increased, meaning that you didn’t have to pay anything up to £250,000 will stay only until 31 March 2025.
“There has also been an overhaul to the R&D system, perhaps the most shocking announcement, whilst targeting abuse of the scheme, they have also reduced the amount of which the relief is available. This means, that for every £100 you spend on R&D instead of getting £230 relief to take against your taxable profits, you’ll only get £186. Also, if you’ve made a loss and you surrender that for a tax credit, then instead of receiving £6.34 for each £100, you’ll receive £3.53.
“The Energy Bill Relief Scheme to help small business will remain in place until March 2023, but the Government intend to review the scheme with the expectation that, from April 2023, there will be targeted support for the most vulnerable businesses.
“It can be a lot to take in as a business owner. It can feel overwhelming and the best piece of advice I would give is to check in with your accountant if you’re not sure what this means for you.”
