To date, the Government has spent more than £372 billion on the nation’s response to COVID-19 and while much of the financial support on offer is due to end in a few months’ time, the spiralling costs have had a heavy hit on the public finances.
That is why one of the South West’s leading accountancy firms, Milsted Langdon, is calling on taxpayers to keep an eye out for future changes to taxation that could affect their plans.
Recently, the House of Commons Treasury Select Committee released a report called ‘Tax After Coronavirus’, which called for a fairly significant overhaul of UK taxation.
This made a number of recommendations to the Government that would attempt to balance the need to recover public finances and allow businesses and communities to recover.
The Government has since published its response to this, saying that “the report leans away from measures that would help to repair the public finances in the coming years”.
It has, however, agreed that more may need to be done to help the nation reduce its debts in future and points to the upcoming rise in Corporation Tax in 2023 and the freeze on many personal tax allowances until 2026 as an indication that it is taking action.
Rob Brown, Tax Partner at Milsted Langdon, said: “At the moment the Government seems to be holding its cards close to its chest.
“This report is one of a number of indications that future Budgets may include new tax measures that seek to recoup the significant spending brought about by COVID-19 and the subsequent recovery.
“While it is hard to predict what these measures might be, it is important that businesses and individual taxpayers keep their eye on the horizon for future increases in tax.”
In the immediate future, however, Rob said that the rise in Corporation Tax would be at the forefront of most business owners’ minds.
From April 2023, the Corporation Tax rate will rise for companies with profits of more than £50,000. However, the new higher rate of Corporation Tax will not be the same for all companies and will instead be tied to their profits.
Companies generating profits of £250,000 or more will see their Corporation Tax rates rise from the current 19 per cent to 25 per cent.
Meanwhile, those with profits between the £50,000 and £250,000 thresholds will receive marginal relief, which means that their effective rate of Corporation Tax will increase with their profits.
“This new system of Corporation Tax requires careful calculations,” said Rob. “For some profitable businesses, it may mean they end up paying much more in tax each year unless they take steps to manage their tax bill.
“The marginal relief rate is set as a fraction, and so it means that the effective rate of tax for businesses with profits between the upper and lower threshold could differ significantly from one another and from year to year – depending on how much annual profit is achieved.”
Milsted Langdon is calling on businesses and individual taxpayers to seek tax advice given the changes that lie ahead and the potential for additional increases in taxation in future.
To find out more about Milsted Langdon’s tax services, please visit www.milstedlangdon.co.uk.