23 February 2024Read more
The Chair of the Conservatives, Richard Holden, has said that there could be two more changes to UK tax law before the election – which is expected to be called in the latter part of this year.
The Guardian reported: “Rishi Sunak will cut taxes twice more before the election in an attempt to turn around the party’s position in the polls.”
While it’s possible that these changes won’t occur – they are just hints after all – as a business owner, you should pay attention, just in case.
What to do if the Government reduces personal taxes
When the Government reduced National Insurance Contributions (NICs) for employees from 12 per cent to 10 per cent after the Autumn Statement, they failed to also reduce it for businesses.
Yes, many individuals welcomed the changes, but businesses – who might not be the Government’s priority for the election – did not see any benefit.
On top of this, they also froze Income Tax thresholds, which could result in something called fiscal drag.
Fiscal drag is where an individual’s income increases due to inflation, pushing them into higher marginal rate tax brackets.
This results in them paying a greater proportion of their income in taxes even if tax rates remain unchanged or are lowered.
This hidden form of increased liability seems to be becoming more and more common and is something to watch out for if/when the Government changes tax laws in the coming months.
The lowering of the dividends threshold from £1,000 to £500 after April 2024 has also made accurate tax planning more complicated than ever so if you need further advice on any of these issues please get in touch with one of our team.
What to do if the Government reduces business taxes
This would be a welcome and major win for an already struggling group.
Businesses have been hit hard by a rough economy over the last few years so reduced business taxes would be a great thing for the Government to announce.
What are the chances of getting reduced rates? It depends.
If the Government is keen to get the economy up and running again, it might choose to create a favourable business environment through considerable reductions.
If they wish to gain favour with business owners before the election to improve their chances, it’s also a good bet that they reduce taxes for the self-employed and corporations.
However, if (as has been the case in the past) they wish to curry favour with lower-earning individuals before the election, it will be personal taxes that are changed, rather than business.
Reduced business rates could mean we get the benefit of some of the following:
Again, these tax reductions are only speculation, so we shouldn’t begin planning for this eventuality yet.
We think that the UK business sector is still in for some seriously difficult months ahead so, if anything, we are recommending that our clients do not get carried away with promises of tax cuts.
In fact, now is the perfect time to reassess your tax strategies and look at cost mitigation methods just in case the changes aren’t as beneficial as first hoped.
We can help you mitigate your taxes. Please get in touch with one of our team.
23 February 2024Read more