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‘Individuals and businesses may face tough calls in the budget’
As the maiden budget of the chancellor Rachel Reeves looms large, a Bristol-based accounting firm has commented on the key points of the budget and its ramifications on various sectors, especially for businesses.
Haines Watts, who boasts a 90-year legacy, may have seen few budgets in its lifetime. However, the experts at the Bristol-headquartered accounting firm pointed out the possible ramifications of the upcoming budget under the spectre of a £22bn “financial black hole” as explained by the government.
As the prime minister Keir Starmer has already announced “painful” decisions ahead, the accounting firm examines “where could that pain be felt?”
Clare Boden and Helen Gale, corporate and personal tax experts for Haines Watts in Bristol and Exeter, offer their views on what businesses and individuals might expect.
Clare Boden, a corporate tax expert at the firm’s Bristol headquarters, highlights the uncertainty businesses face – photo: Haines Watts
Clare Boden, a corporate tax expert at the firm’s Bristol headquarters, highlights the uncertainty businesses face.
She said: “In the coming days, we can expect some headline Budget announcements to be leaked to the media, but for now, businesses are largely in the dark.
“The Government has pledged not to raise the main rates of Corporation Tax, National Insurance Contributions (NICs), Income Tax, or VAT. However, this does not rule out changes to the Corporation Tax system.
“One potential measure could be the removal of the small profits rate, currently at 19 percent for profits under £50,000, which could pose a challenge for small businesses but simplify the associated companies’ rules.”
Boden also anticipates possible reductions in Business Asset Disposal Relief (BADR), which currently reduces the Capital Gains Tax (CGT) rate from 20 percent to 10 percent on business disposals.
Changes might include adjusting the limits on lifetime gains or increasing the minimum shareholding requirement. Additionally, the generous full expensing regime introduced in the last Budget, allowing companies to claim 100 percent of capital allowances on qualifying investments, might see restrictions.
Inheritance Tax (IHT) reliefs could also be targeted, with potential changes to business relief, which currently stands at 50 percent or 100 percent depending on circumstances. Boden advises business owners to stay informed and prepare for potential changes.
While Helen Gale, a personal tax expert at Haines Watts in Exeter, warns individuals to be cautious. She said: “We’re already learning to read the small print with this Government.”
Gale suggests that aligning CGT rates with Income Tax or dividend tax rates could be on the table, as well as changes to CGT reliefs and exemptions.
“Promises not to raise taxes on working people appear to have been a cover for indirect taxes such as council tax rises, raids on pension funds, and so on,” said Gale.
“The fact is that the most effective way to raise large amounts of revenue is to target people by the millions, rather than the big companies and wealthy individuals. We can all expect to have to tighten our belts over the coming months.”
Company dividends, often perceived as a benefit for the wealthy, might see higher tax rates. Gale advises limited company owners to consider paying annual dividends in advance.
According to Gale, “stealth taxes”, such as freezing tax thresholds despite rising salaries, could push taxpayers into higher bands. Gale also mentions the possibility of a flat rate of pension tax relief or changes to National Insurance on employer pension contributions.
As the maiden budget of the new government looms large, Haines Watts has commented on the upcoming budget and its ramifications – photo: Haines Watts
The “Great Wealth Transfer” from the “baby boomer” generation to their descendants is likely to be a target, with potential freezes on IHT thresholds and changes to the nil rate band for main residences. Gale urges individuals to seek advice and take action promptly to mitigate the impact of these potential changes.
“In general there’s little doubt that the Great Wealth Transfer – the inheritance of the post World War II baby boomers passed on to their children and grandchildren – is likely to be the target of this Budget,” said Gale.
Main photo: UK Parliament/ Jessica Taylor
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