Now that everyone has had time to start absorbing the details of last month’s announcements, we can begin to consider what the impact will be and what if any actions are required to minimise the effect on businesses and families.
The overall impact of the proposals will be an increase in the tax burden as a result of:

• Freezing income tax allowances  and tax rate bands
• Reducing the starting point for the 45% tax rate to £125,140
• Increasing the main rate of corporation tax to 25%
• The increase in dividend tax rates of 1.25% in April 2022 to fund health and social care will remain so dividend tax rates will continue at 8.75% / 33.75% and 39.35% for basic / higher and additional rate tax payers.
•  Reduction in dividend allowance from the current £2,000 to £1,000 from April 2023 and to £500 from April 2024.
• Capital gains tax exemption is reducing from £12,300 to £6,000 in April 2023 and to £3,000 in 2024
• The inheritance tax nil rate band is to remain at fixed at £325,000 until 2028.

We will be considering the impact of these changes over the coming months prior to the end of the tax year. Possible actions to consider may include:

• Will the tax changes influence how owner managers extract funds from their businesses? 
• Should asset disposals be brought forward to make use of the annual exemption?
• Is there a benefit to bringing forward income to the current year?
• Making sure full use is made of reliefs and allowances e.g. pensions, ISAs, claiming gift aid etc.
• Consider spreading income between spouses and family to utilize lower tax rate bands and allowances.
• The continued freezing of the IHT nil rate band means more people will be paying inheritance tax and encourage review of giving and other options. 
  
  

Please feel free to forward this newsletter to any colleagues or friends who may be interested in it.

For more information or to discuss any issues raised above please contact Simon Bell by phone on 01376 571358 or email [email protected]