bennett brooks Tax Director, George Lovell
George Lovell, gives his thoughts on the budget from his position as Tax Director at bennettbrooks.
“Yesterday’s Budget was highly anticipated with fears of sweeping tax increases to address the country’s debt burden and to fund the government’s desire to increase spending in certain areas, the flagship being the removal of the two-child cap on child benefit. Many of the rumours had been started by the government itself over the last few weeks, so it was perhaps ironic that the Office for Budget Responsibility’s report was published online shortly before the Chancellor took centre stage which gave us a chance to see what was coming.
In the event, the changes to our tax rules seem to be much more balanced than they could have been and many of the measures are deferred until 2028 and 2029. The areas for initial consideration in the short term are:
- Assess the impact of the increase in dividend tax rates on business owners, particularly to decide whether the long-standing preference to draw dividends instead of salary is still the most effective strategy,
- The 2% increase in the tax rate for rental income could be a prompt to reconsider an incorporation of larger property portfolios to take account of the corporation tax rate which remains unchanged,
- National Insurance contributions will be charged on salary sacrifices in return for increased pension contributions over £2,000 from April 2029, which gives over three years to continue with the current position,
- The introduction of the “Mansion Tax” may be the thin end of the wedge – the surcharges of £2,500 and £7,500 on properties worth £2 million and £5 million are relatively benign. However, the experience of other property-based taxes has been that the threshold may reduce and the surcharges increase in future years once the initial shock of this new tax has passed,
- A big increase in the size limits for companies that can issue EMI options, which will dramatically increase the number of businesses that can provide these tax-advantaged options to their employees,
- A positive and sensible change is to allow the £1 million inheritance tax relief for agricultural and business property to be transferable between spouses: this was not previously the case, which in many cases required assets to be transferred between spouses and then held for two years before they qualified for the relief.
If you would like to discuss any of these or other Budget changes, please get in touch.
