You can never truly know the content of the Budget until the Chancellor has sat down and you get to grips with all of the publications generated by HM Treasury, even in this day and age, when numerous announcements are leaked to the press in the run up to the big day.
Often those publications reveal numerous juicy tax changes to talk to clients about, but this Budget left us searching in vain for many announcements that would rock the tax world. For a Budget that set out plans to raise the overall tax take to their highest level in 70 years the Budget seemed very low in tax… tax content that is.
Partly this was due to several big tax raising measures already having been announced, in particular, the rise in national insurance and the income tax rate applicable to dividend income with effect from April 2022 which already has taxpayers considering how they time bonuses and dividend payments.
Other tax raising “stealth” measures such as the freezing of allowances were known well before budget day, as was the uplift in the rate of corporation tax to 25% from April 2023.
These measures, together with the better than anticipated economic forecasts as we recover from the financial impact of Covid 19, allowed the Chancellor to focus his speech on the spending plans which have attracted the main headlines.
So, what did we see in the rest of the announcements? An interesting and welcome change was the extension to the reporting deadline for capital gains tax on residential properties – the 30 day period allowed to report such gains and to pay the required tax has been doubled to 60 days. Furthermore, clarity was provided for UK residents having to report a gain in respect of mixed-use properties (i.e. property containing both residential and non-residential areas).
There was a further extension to the temporary £1 million limit to the annual investment allowance – this will now remain at that level until 31 March 2023, deferring the complexity of the transitional provisions which apply to each time this yo-yo allowance changes.
In the corporate tax world we saw tweaks around the edges of the research and development tax relief (extending qualifying expenditure to include data and cloud costs, while restricting the relief to focus it towards UK activities), restrictions to cross-border group relief (reversing changes originally brought in to comply with EU provisions) and a response to the consultation on the residential property developers tax.
But perhaps the most interesting thing about the Budget was the absence of any changes to inheritance tax and capital gains tax, despite much frenzied speculation that rates and relief would be under threat. This was indeed a very large dog that did not bark. No doubt similar speculation will continue over the coming years but given that the current Chancellor has indicated he is on a moral mission to cut taxes, perhaps calmer heads will prevail.
Maybe the most appropriate reaction to the Budget would be to give a big sigh of relief or raise a glass of Prosecco (or draught beer) to celebrate!
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