It was all about Marmalade after all – sweetness covering the natural bitterness.
Most of the sweetness was only keeping up with should be done to help businesses tread water:
Business Rates Threshold Increase – This increase in small business rates relief from £12k to £18k for retail, hospitality and leisure so more businesses don’t pay rates, is only an inflationary increase if previous changes hadn’t been made.
Business Mileage Rate Increase – The increase from 45p to 55p is made permanent and the 25p that applies over 10,000 miles increases to 35p from April 2027. Seeing as the 45p and 25p have been around so long, I suspect these increases go nowhere near to covering the real cost of providing a car for business use.
Subsistence Allowances - Large increases are coming in from April 2028, which is very welcome. For example, if you're away from your normal place of work for over 5 hours, you may claim £20 instead of the current £5 tax free as long as you incur some cost. The overseas rates will be simplified which perhaps might result in some net reduction for travel to certain countries. Company owner-managers may claim these allowances, but not sole traders.
Trading Allowance Increase From £1k to £3k – This is helpful for small traders eg regular ebay sellers, but expenses can’t be deducted. If you set up a business or invest heavily so you have a tax loss, don’t claim this, submit your tax loss and get a refund from taxed income in the same or previous years.
Capital Gains Tax – At least the normal rates have been left alone. However, BADR – Business Asset Disposal Relief – has been halved to a £500k lifetime limit which has a maximum value of £30k for any one taxpayer for their whole lifetime.
Unless of course you’re a ‘Founder’ where there’ll be a new 10% rate on gains up to £10m – restoring the original Entrepreneurs Relief but making it harder to achieve. The consultation refers to many requirements such as having a turnover of over £10m and at least 15 employees excluding many SMEs.
R&D Advance Notification Form Removal - From April 2027, this will no longer be required which is great news. However, these weren't required for many years and restores us to a previous sensible position.
EMI and CSOP Share Option Scheme Limits Increased - This is great news except that SMEs instead regularly ask for simplification. The EMI rules in particular are too tricky for many to understand with HMRC very happy to withdraw the tax reliefs if there are small infractions easy where schemes are in place for several years. SMEs don't have in-house finance people to continually oversee these.
MTD ITSA - Those joining for the first time in April 2027 (over £30k turnover or rents) won't suffer late filing penalties during 2027/28. This is only sensible and fair.
Cash ISAs - Keeping the £20k annual cash limit is welcome news but is simply keeping an old threshold whose real value has decreased anyway of course.
Pension Tax Allowance – And this is how we get a complicated tax system…. It was already given that if you only had state pension income, the excess above £12,570 wouldn’t be taxed. There’s now a withdrawal of the allowance for income above the new allowance at a rate of £1 for every £3.
And the bitter was pretty bitter:
Rental and Savings – A further 2% increase in the tax rate from next April 2027 takes the tax rates to 24%, 44% and 49%! This can only further increase the rents that landlords will need to charge. I suspect this will also encourage more property business incorporations because more will now be viable over the long term.
Presumably as interest rates rise, the same increase in tax on savings income couldn’t be resisted so the government can get more from a larger pot – if anyone has any savings left of course.
Self Assessment Tax Collection – From April 2029 this will now be more regular. This has been billed as helping taxpayers, but I’m not sure hard pressed businesses and taxpayers will agree with this.
Company Car Benefit In Kind - There's a further 1% increase in 2030/31 which together with previous years already announced is now starting to add up. An EV will by then have a 10% Benefit In Kind.
Capital Allowances - The reduction in the main rate from 14% to 12% makes this an absolute last resort. It would take over 19 years to write off 90% of your investment! Most SMEs benefit from the 100% tax relief under AIA for up to £1m per year, but there are some old capital allowance pools still gradually being written off.
EVs may not be getting their renewal of 100% capital allowances which expires in April 2027. If so, EVs will be subject to this 12% tax write off! If you're planning to buy a company EV, you might want to ensure you purchase it before April 2027.
If there is a message, it seems to be to encourage a move from 'passive' investments to a more 'active' use of resources into medium and larger business. In particular you might do well to move into the defence sector or, failing that, a small cafe without staff in a low rateable property serving marmalade on toast...