What does the latest announcement from the Chancellor mean?

Hillier Hopkins LLP

Chartered Accountants & Tax Advisers

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We could be blunt, and say that with so many U-turns, it is hard for anyone to be sure.  On the 17th October , the Chancellor told us that he is not reducing income tax to 19% for the foreseeable future, he is not cancelling the previously cancelled rise in corporation tax, he is not planning to reduce dividend taxes and he may do other things too, but he didn’t say what they were.  He is retaining the previously announced increase in investment allowance.

So what appears to be clear, until he changes his mind, is that the basic rate of income tax will continue to be 20%.  For companies, the headline rate of tax will be 25%.  Companies earning profits up to £50,000 will still pay 19% and there will be a sliding scale up to the full 25% rate.

The non-reduction of the dividend tax rate seems to indicate that the 1.25% surcharge that was meant to be the dividend equivalent of the social care levy will remain.  So only those paid by dividends will now pay that levy, it seems. We will have to see what the legislation says, but that is the only interpretation we have so far found.

If this all seems a little downbeat to our clients, we should remember that this is exactly where we were before Liz Truss became Prime Minister.  The main trouble we have is that it is hard to make any plans at present, because the evidence seems to indicate that nothing that gets announced by a Chancellor actually happens.  All we can really do is watch to see what happens.

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Jonathan Franks - Principal at Hillier Hopkins

Jonathan’s 30 years in practice have been devoted to looking after owner-managed and family businesses, whether as auditor, accountant, or adviser on corporate transactions.

Contact Jonathan at jonathan.franks@hhllp.co.uk or on +44 (0)20 7004 7110