The backdrop of uncertainty
We’ve had the backdrop of uncertainty for the last three years with Brexit and COVID-19, the Russian invasion of Ukraine and, more recently, the energy and cost-of-living crisis.
These factors have made it extremely difficult for businesses and people to plan ahead, and also, highlighted just how important it is to have up-to-date news and advice. Especially, as we’ve seen in the days following the mini-budget just how quickly things can change.
However, rest assured we are here, as ever, to provide as relevant, accurate news to our clients and followers as possible, and offer reliable information and context on the current economic position.
Our current challenge
What we do know about uncertainty, perhaps most clearly seen in the market’s reaction to the budget, is the detrimental impact it has. People and businesses prefer stability, so finance and the future can be planned. Herein lies the crux of our main challenge – the lack of stability.
In the budget – the scrapping of previously planned tax rises
Many planned tax rises by Rishi Sunak, announced back in March 2021, have been reversed in the mini-budget. The long lead time gave businesses the notice to be able to plan for them. After all, the cost of COVID-19 relief had to be paid for and this was the chancellor’s plan for doing that.
The recently announced measures of scrapping tax rises may be welcomed, but raise a question mark over how the hole left from the reported £45 billion they will cost, on top of the reported £60 billion in energy relief, will be filled, and are they really enough to help businesses weather the current storm.
Here’s some of what was announced in the mini-budget
- Corporation tax will stay at 19% and not rise, as previously planned, to 25%
- Income tax will be cut to 19%, from 20%, in April 2023
- The recent increase in NI to 1.25% will be reversed this November
- The higher rate of 45% income tax that was to be scrapped in the mini-budget, has now been u-turned and will remain
- A 1.25% increase in dividend tax will be reversed in April 2023
- There will be no stamp duty on the first £250,000, (£425,000 for first-time buyers), from this September
- The £1m Annual Investment Allowance to be made permanent
- Repealing the 2017 & 2021 off-payroll working (IR35) reforms from 6 April 2023
More questions than answers
Unfortunately, or fortunately, the story isn’t finished with this mini-budget and the Chancellor’s economic forecasts, originally planned for November, have been brought forward to the end of October in a bid to calm the storm.
And, while the energy relief for individuals and businesses is welcomed there remain the red lights over energy, as well as the cost of living, and the knock-on effects of reduced consumer spending.
Announcements designed to drive the building sector
We are seeing property clients and developers facing rising prices, labour shortages and increased costs of borrowing. So, a few of the announced measures may be good news for the building sector. While the stamp duty threshold rise may be good for buyers, the introduction of investment zones is seen as positive by developers.
Deregulation of planning in new ‘investment zones’
To help stimulate the building industry and drive growth, the government is in discussion with 38 local authority areas to create specific areas for development that have lower taxes and/or “streamlined” planning. While good news for the sector, there remain uncertainties around what exactly this means and how it will operate, with concerns over the resulting impacts on communities.
The need for balance
As with many of the recent government measures proposed, including tax cuts, there lacks balance for the measures to be wholly welcomed. While tax cuts may be positive, the predicted £100bn hole left has created significant market anxiety. And while less planning regulation may be good sector news, it might not be the case for surrounding neighbourhoods.
Lack of balance with the green agenda
While we pledge to reach net zero and cut our carbon use, it feels like the government’s reaction to the energy crisis to increase investment in oil, and re-introduce fracking, is at odds with the green agenda. Could the Russian energy crisis be the perfect time to focus on more planet-friendly, renewable energy technologies, and help people to become more energy efficient?
Reliance on resilience
Over the last three years, we’ve seen our clients and businesses build remarkable resilience. Amid so many worries and concerns, businesses are seen admirably getting on with the job at hand, riding the storm with many already taking stock of their financial position.
We can help you plan ahead and work through scenarios
Foxley Kingham is here as a sounding board, to help you plan and work through scenarios, should you need to consult on your financial position. We would encourage you to speak to us, if you have any worries or concerns, or need help to plan ahead. Read our guide to making the most of your tax allowances before the end of the tax year.
If we know one thing now, that particularly COVID-19 taught us, we’re used to expecting the unexpected.