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Mini Autumn Budget 2022: Initial Expert Commentary

Our experts react to the Chancellor's Mini Autumn Budget on 23 September

Nimesh Shah, CEO

“The highest rate of dividend tax rates will be reduced by 6.85% from April 2023 – this is one of the largest tax cuts in Kwasi Kwarteng’s Mini Budget.”

Caroline Le Jeune, Head of Tax

“This radical Mini Budget will reverse many years of socially driven economic policies.  Although strong leadership is sometimes attractive this will alienate many of the electorate.”

“This is certainly a revolutionary Mini Budget. If this is a “Mini Budget” what is left for the full Budget!”

“Tearing up the recent changes to off-payroll working is opening the door again to what was previously criticised as tax avoidance.  A complete reversal to the trends of the last 20 years.”

“In 25 years of analysing Budgets this must be the most dramatic, risky and unfounded Mini Budget. It is based on the hope that this will stimulate an economy in an unprecedented period of change for the whole world. I think it will, but have doubts that the benefits will outweigh the giveaways.  Truss and her new Government are taking a huge gamble.”

Genevieve Morris, Head of Corporate Tax

“It will be welcomed that the proposed increase in Corporation Tax has been cancelled and that the tax that companies will pay will remain at 19%.  It’s a double bonus for businesses that have benefited from the 130% super deduction between April 2021 and April 2023 which was designed to encourage accelerated capital spending rather than delaying spending until the higher tax rates came in.  A big giveaway to profitable businesses.”

“Bit of a moot point considering the later announcements, but the Extension of EIS beyond the sunset clause was expected but is welcomed that it has been announced early – unlike the extension of EMI that happened at the last moment!”

“So, the wealthiest working are now what, 6.25% better off? Yet pensioners / lowest earners only 1% better off…”

“Businesses relocating from London to new investment zones – with remote working a relocation may not impact their workforce and may not create local employment as a result…”

Sean Randall, Stamp Duty Land Tax Partner

“For transactions from midnight, the Government has cut Stamp Duty by up to £2,500 for property purchases completing from today. The maximum saving for first-time buyers is even greater at £11,250. Like the extension to the last Stamp Duty holiday the cut is given by increasing the point at which the tax is payable. Now, the first £250,000 of the price is exempt for home movers and the first £400,000 is exempt from first-time buyers.”

“Before today, only the first £125,000 was exempt for home movers and £300,000 for first-time buyers. The cap for partial first-time buyer relief will also be lifted from £500,000 to £625,000. In contrast to the previous holidays, however, this cut is not time limited. The aim is to grow the housing market.”

“Like the other announcements made today, it’s a big risk. If it works, it will warm up the parts of the economy connected with the housing market at a time when the Bank of England is trying to cool down the economy. It will also drive up house prices, meaning that the saving will be enjoyed by sellers rather than buyers. We worry that buyers tempted by the tax cut will suffer when interest rates rise further, as they are predicted to. Those tempted by the last Stamp Duty holiday have already started to leave fixed-rate mortgages and are bearing the increased cost of borrowing. Will the measure create a house price bubble that will burst? If so, this will surely (more than) reverse any growth promoted by it?”

Robert Salter, Global Mobility Director

“The idea that the bonus cap removal will act as a ‘carrot’ for bankers to set-up in London is simply untested.”

“The investment zone National Insurance waiver is interesting, but again it is something which actually complicates the payroll obligations for companies and HMRC’s oversight of payroll compliance.  In particular, given the increase in home office and remote working, it will be difficult to see how these investment zone reliefs will – on a practical basis – actually work once they face the challenges of the real world.”

“Office of Tax Simplification – this is a disappointment and the idea that the Chancellor of the Exchequer, can simply automatically accept and impose tax simplification in the everyday actions of tax and treasury officials is a simple fallacy.”

“IR35 rules – the plan to repeal the 2021 reforms is welcome.  However, it is interesting that this only appears to apply to contractors and freelancers working in the private and not-for-profit sector, whilst the 2017 rules will continue to apply – it appears – for contractors working in the public sector.  If this is the case, it will only continue the problems faced by public sector who struggle, for example, to find skilled IT contractors.”

“45% cut – this only appears to really benefit the very wealthiest individuals.  Moreover, the problem with this cut is that it doesn’t actually address any of the real pinch points and unfairness within the tax system. Specifically, for example:

  • The cut in the tax rate of the very highest earners from 45% to 40% simply reinforces the unfairness associated with those who are caught by the withdrawal of the personal allowance on income between £100,000 and £125,000.  People earning in this range have a marginal rate of tax of 60% (plus NIC on top of this), compared to the 40% faced by the highest earners.
  • Similarly, families in receipt of child benefit still face a child benefit clawback, when one partner earns over £50,000 per annum, which can see the higher taxpayer in such situations facing a marginal tax charge of 65% – 70% (or more – it depends upon the number of children in the family), compared to the 40% marginal tax rate for the highest earners.”

“My concern is that the Government’s recent Mini Budget will – combined with the wider base rate changes – create increased uncertainty in the how the world sees the UK’s Government finances and increase the pressure on Sterling, with the currency becoming increasingly less attractive to international investors.  Sterling is already at a 30 year low against the US Dollar and the weaker that Sterling becomes, the greater the costs of importing goods into the UK.  As such, Sterling’s weakness might result in us ‘importing inflation’ from abroad.  Overall, ongoing weakness with Sterling will create additional economic pressure on those British manufacturers and suppliers who have international supply chains and obtain some of their products and raw materials from overseas.”

Neil Insull, Corporate Tax Partner

“The cancelled rise in Corporation Tax rate will be welcomed by many large corporates.  But for 70% of companies, that’s about 1.4 million businesses, who would have continued to pay at 19%, there is no benefit.”

“The Annual Investment Allowance has bounced around since its introduction in 2008. The announcement today to increase it to £1m is intended to be “permanent” but can businesses have any confidence that the new higher limit will be here to stay? The past says otherwise.”

Andrew Sanford, Audit Partner

“How on earth can this be defined as a Mini Budget?  This is the biggest role of the dice I have seen in my professional career.”

“A fall in the higher rate tax band from 45% to 40% means that bonuses and dividends will be delayed until the new tax year to pay the lower rate of tax. This means that there will be a one – off significant fall in tax receipts next year from income tax receipts, at the same time he is funding utility bills. This must mean more debt and the risk of higher interest rates and worsening exchange rates.”

“Whilst the Government wants to simplify tax, totally changing the tax landscape in one go, means that business in the next 6 months will be scrambling around to change their financial strategies, at a time when they still need to be focussed on their own commercial activities. A key concern is that if this Budget causes macro-economic instability, any tax savings will be offset by interest rate and foreign exchange rate instability.”

Marc Levy, Audit Partner

“Following the cancellation of the increase in Corporation Tax, businesses with capital projects scheduled after 1 April 2023 will need to consider whether there is scope to bring them forward, before the 130% capital allowance super-deduction expires.  However, does the country have the capacity to fulfil such projects, before they become significantly more expensive?”

George Parker, Private Client Manager

“Reducing benefits for people not actively looking for work; yet ‘uncapping’ bankers bonuses. This will not sit well with the electorate.”

“No mention of VAT cuts. A reduction in the 5% and 20% rate for commercial and domestic energy respectively would have been welcomed.”

Simon Rothenberg, Audit Director

“Another promise to simplify taxes following an announcement for specific tax rates for certain areas with at least four different tax cuts for only those areas.”

“Some certainty on the Annual Investment Allowance (until the next Chancellor) with a permanent £1m limit – but no comment on the super deduction so presumably this is stopping as planned – a shame but no surprise.”

“VAT free shopping for overseas visitors will make goods in the UK even cheaper than they currently are with the historically low value of GBP – this will please high end high street retailers but will not impact most of the high street which desperately needs more help.”

Jez Filley, Head of Audit and Accounting

“Increased promises and benefits for those in work but we are already at record employment levels. How do we unlock the supply side and increase productivity which is what is needed in the long term for us to be competitive?”

“They are taking a gamble that, even prior to understanding the scale of, the markets have reacted uncertainly to.”

Neil Lancaster, Private Client Partner

“I appreciate the controversial nature of some of the tax policy here and the cost, but this is the most sophisticated package of growth plans I’ve seen in my lifetime. No Government has dared to challenge land banks, the red tape in town and country planning, and really tackle homebuilding to manage the cost of housing (of which this current crisis is predicated).”

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