A great deal of my down time during the Global Pandemic was spent binge watching TV Box Sets with one particular long dark wintery weekend being spent catching up on Games of Thrones.
For those of you not in the know Game of Thrones was a massive US Series where a number of noble (and possibly not so noble) families spent all their time either scheming to claim the Iron Throne or fighting for independence from whoever sat on it.
Quite an apt analogy since I’m sure like me you’re losing count of the number of Prime Ministers and Chancellors who have sat on our very own Iron Throne over the last few months and years, but even more so when you consider that in delivering his Autumn Statement Jeremy Hunt made statements such as “Pay its way” and “We never leave debts to the next generation” – both of which were family mottos of the Lannisters.
Whilst entirely admirable character traits the benefit of the analogy probably stops there as the Lannister family were in reality the most cunning and Machiavellian of all the noble families in what was already an extremely complex plot. Having said that we are talking about politics, so perhaps I rest my case.
As the latest Chancellor to the “Iron Throne” the most important aspect of Jeremy Hunt’s Autumn Statement was the delivery and the market reaction – the sole objective being to maintain Market and World Confidence and to show that the United Kingdom Government had a fully funded plan to deal with Global Headwinds against a backdrop of inflation at 11.1%, rising interest rates, recessionary pressures and a large hole in the public finances.
Headline measures introduced by Mr Hunt were:
- From April 2023 the rate at which people pay the additional rate of income tax, charged at 45%, will change from £150,000 to those earning over £125,140.
- Tax-free allowance for capital gains will reduce in 2023-24 from £12,300 to £6,000 and again to £3,000 in 2024-25.
- The tax-free dividend allowance will be reduced to £1,000 in 2023-24, and then to £500 in 2024-25.
- Personal tax thresholds, NIC thresholds, and IHT bands will be maintained at current levels for a further 2 years, until April 2028 to strengthen public finances.
- Stamp Duty Land Tax cuts announced in the Growth Plan will now be time-limited, ending on 31 March 2025.
From a business perspective, perhaps the most surprising announcement was that the Research and Development tax relief for Small and Medium-sized Businesses is to be reduced from 130% to 86% and the repayable credit reduced to 10% whilst the RDEC will however be made more generous with the rate increasing from 13% to 20%.
The SME R&D scheme has been under parliamentary scrutiny for some time with a clear focus on driving out spurious claims and tax avoidance so in the end it was inevitable that there would be a change to the scheme, and in many ways it’s a welcome first step towards a simple unified scheme.
The impact of the reduction is in any case mitigated by the increase in the corporation tax rate at which relief is obtained and also by the fact that there is a slight widening of allowable costs for R&D purposes so, for example, cloud computing costs will be allowable.
The general theme of the measures is clear in that a mixture of freezing and cutting of thresholds will see half of the funding gap filled by increased tax revenue with the balance being met by management of government spending. All in the hope that inflation would at the same time come under control and we wouldn’t end up in what Mr Hunt described as the “Doom Loop”. Must admit I’ve not heard that one before!
A full list of the measures can be seen here. If you would like to discuss any aspect of the changes do get in touch.
