Budget predictions

Is it likely that capital gains tax rates will be increased?

There is a possibility of some changes to the capital gains tax regime coming into effect. The Office of Tax Simplification has commented that the disparity between income tax can distort business and family decision making.  One option open to the Chancellor would be to increase CGT rates, though he may then need to also introduce an allowance for inflation.  If a rate increase was announced in advance (say April 2023) this could encourage asset owners to sell early, thus generating tax revenue (even at a lower rate) which would be a good boost tax collections earlier than otherwise.

However, we consider that to make the changes more politically acceptable it is more likely the Chancellor will make changes to capital gains tax reliefs (potentially restricting them), rather than increased the tax rate specifically.

With the Corporation Tax rates set to rise in April 2023 do you think there will be any further tax rises for companies?

Looking at the recent IFS Green Budget and the UK’s debt to asset ratio compared to other countries, it seems unlikely at this stage that the rate increase already announced will be changed. The new increased rate of Corporation Tax of 25% is already included in the 2021 Finance Act so any changes to this would need to go through parliament again.

Are there any further changes to pensions predicted?

The state pension is likely to increase in line with inflation, as it has done in the past.

The Government has already announced that it will temporarily set aside the triple lock for state pensions and it has also been hinted on a number of occasions over the past years that there will be some reform on the tax relief on pension contributions. However, while there may be some technical changes to the way the rules operate, we do not anticipate any major changes to pension tax rules.

Is it likely to be any further tax relief boost for businesses?

Yes, there could well be, as one of the Government focus over the past years has been to encourage investment in businesses and capital spending to increase productivity.  The temporary increase to the capital allowance 100% ‘annual investment allowance to £1m for the period to 31 December 2021 may have been eclipsed by the unlimited expenditure available on certain qualifying plant and machinery under the 130% super deduction available until 31 March 2023. However, perhaps one option to the chancellor could be to make the current AIA threshold permanent.

There has also been a review and consultation on R&D tax reliefs so it is possible we could see the range of qualifying expenditure for this relief being widened.

Are any changes to employment taxes likely to be announced?

There are already planned increases to employee and employer NIC announced which come into effect from April 2022, but it has been reported that the National Minimum Wage could potentially go up to £9.42 per hour.

Is there anything we can do now to help retain our staff as well as keep our employment costs to a minimum?

One area to consider is a review of your employee reward packages. Some considerations could include the following:

• There can be significant savings to be made by changing to an electric vehicle
• If not currently using this, consider introducing salary sacrifice arrangements for pension to help enhance employee net pay at a time when every penny counts.
• Think about how share schemes, apprenticeships and the Government’s new Skills Programmes can be utilised to enhance reward, align employee incentives with business strategy and reduce costs.

HMRC must be under pressure to improve tax collections – what do you think are the likely areas to be targeted?

Increased pressures to collect tax may result in an increased focus on compliance.  Particular areas of focus could be CJRS claims, National Minimum Wage, Employment States and Employment taxes and compliance with off-payroll working rules.

Also, likely to come under additional scrutiny is planning around dividends, directors’ loan accounts and tax planning for family members so it’s important to make sure that all necessary documentation is in place and seek advice on any tax planning as soon as possible.

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