Tax Partner in Wales, Leighton Reed, has reviewed Chancellor Rachel Reeves’ Autumn Budget and its potential impact on the Welsh economy and Welsh businesses.
Whilst recognising that changes in market growth and geopolitical events make it difficult to properly plan, businesses across Wales want more stability and a longer term plan for tax in their Christmas stockings this year.
For example, the changes made in last year’s Budget to inheritance tax and possible changes this time around, have forced business owners to accelerate their succession plans, earlier than they are comfortable doing. As my old boss used to say “Tax should not wag the tail of the commercial dog.”
The lead up to this Budget seems to have been chaotic, starting back in July. It became clear early on that there is another black hole to fill, in addition to the £20bn last year and so tax changes were inevitable. Instead of a universal increase in income tax rates, we expected a “smorgasbord” of tax changes. Yes, I had to Google this too!
The changes today were extensive and varied. Property owners will face a double whammy: a 2% increase in tax rates on property income and a council tax surcharge on properties worth over £2m (the “mansion tax”). The tax rate on savings and dividend income will also increase by 2%.
For those in business, there will be an effective increase in corporation tax rates through a reduction in tax relief for plant and equipment, although it seems the annual investment allowance of £1m will remain. The Chancellor briefly mentioned a welcome change to tax incentives around employee share ownership although only where employees hold shares or share options directly. Those looking to use the all-employee ownership trust route will be very disappointed as the upfront tax relief for business sellers will be reduced.
Employees will also be assessing the impact and looking for alternative employer benefits due to the proposed pay per mile charge for electric and plug-in hybrid cars and the proposed National Insurance charge on pension contributions through salary sacrifice.
"Despite all the pain, there was some good news. There appears to be no change to the inheritance tax 7-year rule for gifts, no changes to higher rate tax relief on pension contributions and no increase in National Insurance for those in professional partnerships. Selfishly speaking as an accountant, I breathe a sigh of relief."
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