Forget the opinions. Time to focus on the facts.

Part 2: corporation tax, income tax and stamp duty land tax

Having dealt with arguably the most complicated area of recent tax developments, national insurance, in part 1, part 2 is by way of a summary of what has happened in other significant areas of tax featured in the mini-Budget and Jeremy Hunt’s subsequent revision of its proposals.

Corporation tax

Less detail is required on corporation tax, the other complicated area of change, because I have already blogged in detail on the massive uncertainties introduced by the reinstatement of the small companies’ rate band. That was, of course, before that reinstatement was abolished and then re-introduced unchanged.

So, the headline rate of corporation tax increases from 19% to 25% from 1st April 2023. In isolation, this will lead many companies to seek to accelerate income and/or defer expenditure until the new rates are in place, or to reconsider their accounting period end date to seek to minimise tax liabilities.

However, the real complication involves the £50,000 small companies’ rate band, for which the current 19% rate is maintained. The issue is that this has to be shared equally between all active companies under common control, which introduces a whole range of issues about what is control and what is an active company.

I have to say that before the O turn on corporation tax HMRC had no idea what the practical definition of an active company was going to be, and I am nerving myself with 5 months to go to approach them again, because it is unacceptable to have no detailed guidance on the implementation of a major tax policy change only 5 months before it comes into effect.

Income tax

This is relatively straightforward, in that the current regime continues, with no abolition of the 45% rate and no reduction of the basic rate to 19% from 1 April 2023, with the dividend tax rate remaining at 8.75% despite the removal of the social care levy from national insurance contributions, of which this was the counterpart.

Stamp duty land tax

The main changes from the mini-Budget survived Jeremy Hunt’s review unscathed. These are as follows, applying in each case to residential property:

  1. The nil rate-band is doubled from £125,000 to £250,000, with the 2% rate abolished (this applied from £125,000 to £250,000)
  2. The nil-rate band for first time buyers is increased from £300,000 to £425,000 and applies to properties worth up to £625,000 (previously £500,000).

Hopefully this clarifies matters after the confusion of recent weeks. I will of course share when HMRC gets round to deciding how it is going to interpret the ‘active company’ rules with respect to holding companies.

By |October 31st, 2022|Uncategorized|0 Comments

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