14 October 2022

UK Government U-Turn on Tax Cuts

On Friday afternoon, the UK Prime Minister, Liz Truss, held a press conference. Ahead of this press conference, it was announced that the Chancellor had resigned/been sacked (depending on whose version of the truth you are listening to).

In this press conference, the September tax cuts promised in the mini-budget have been watered down even further.

What we know so far is that:
The Corporation Tax will rise from 19% to 25% in April 2023. It is unclear whether or not that includes the previous 19% tax rate for profits under £50k, with a tapering of tax rates up to £250k profit.

As already announced the removal of the 45% top rate for high earners has been scrapped.

What is still, apparently, going ahead from the mini-budget is:

– The income tax basic rate was cut by 1p to 19p in April 2023

– The scrapping of the 1.25% rise in National Insurance from November 2022 is still going ahead.

Our thoughts:
Hang onto your hats for a while longer. The Conservative government is in turmoil right now. Read any online news sites, and you will see speculation about whether Liz Truss can keep her job as Prime Minister. Or whether the new chancellor, Jeremy Hunt, will become a caretaker leader.

As a fellow business owner, I hope for stability and certainty in the months ahead. After all, that is what we all need to be able to plan and take decisions for the future. However, my sense is we are far from the stability we require.

This is what I think we can rely on going forward:

– The cost of living crisis is going to bite hard over the winter
– It is important to keep an eye on your business’s cash going forward
– The cost of borrowing is going to increase as interest rates increase
– It will be harder to get access to finance
– The turmoil will bring opportunities for business owners who manage their finances carefully and prepare to be bold and make good decisions.

If you are uncertain about the future or how to cope with the headwinds coming your way, then get in touch. We are here to help.

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