With Sir Keir Starmer now in No. 10, there are quite a few changes and proposals on the horizon. Let’s break it down in a way that’s easy to digest, so you can understand what’s coming and how it might affect your business.
Making Tax Digital For Income Tax Self Assessment (MTD for ITSA)
On the digitisation front, Making Tax Digital (MTD) is still a big focus. Labour’s post-budget doc mentions closing the tax gap through better administrative processes, so we’re definitely moving towards more efficient tax reporting.
Future Budget Expectations
We’re expecting the next budget announcement around late September or early October. The chancellor will probably hold off on major tax policy announcements until then. It’s a good time to stay alert and be ready for any changes.
Research and Development (R&D) Compliance
A few years back, boutique firms, not necessarily tax experts, began aggressively marketing R&D claims. They promised companies R&D tax credits, sometimes without solid grounds.
HMRC is now cracking down harder on compliance. Legitimate R&D claims are getting more scrutiny, which means more paperwork and possibly some delays. So, make sure your claims are airtight.
Tax Gap Issues
Tax gap captures the difference between what should be paid and what actually is. HMRC has been consistently estimating the tax gap for over a decade. The current government has realised that investing in HMRC’s compliance work is a no-brainer, as they collect £14 for every pound spent on it, so will allocate more resources to reduce the tax gap and boosting compliance.
If you’re running a small business, brace yourselves. Compliance is going to be a major focus in the coming years. The message is clear: get your tax affairs in order, because HMRC is gearing up for a crackdown.
Corporation Tax and Capital Allowances
Labour is capping corporation tax at 25% for the next five years. They’ll keep the permanent capital allowances and the £1m Annual Investment Allowance (AIA), which is great for planning your investments. Plus, they’re going to publish a business tax ‘road map’ within the next six months, so there’s some certainty there.
Business Rates Reform
Big changes are coming to the business rates system. Labour wants to create a more level playing field with giant online retailers. This new system should incentivise investment, tackle empty properties, and support entrepreneurship. Expect a consultation on this soon.
Digitisation and Compliance
Digitisation is a big push. Labour plans to boost HMRC’s resources, hire skilled professionals, and update legacy systems. This should help with tax collection and reduce errors.
Full Expensing for Assets used for Leasing
Right now, there’s a bit of uncertainty, which is pretty normal when a new government comes in. Labour’s been talking about extending full expensing to assets used for leasing – but no formal consultations yet. It’s something to keep an eye on because it could mean more opportunities for investment.
Personal and Corporate Tax Policies
Labour won’t increase income tax, National Insurance, or VAT but hasn’t ruled out changes to CGT or pension tax relief.
National Minimum Wage
Labour plans to remove age bands in the National Minimum Wage and establish a genuine living wage. This will affect businesses employing younger workers, so you’ll need to adjust your payroll accordingly.
Conclusion
So, what does all this mean for your business? The new government’s policies bring a mix of opportunities and challenges. From tax reforms to digitisation efforts, staying informed and adaptable is key. The business tax ‘road map’ and retained capital allowances offer some stability, but increased compliance scrutiny means you need to be on top of your game.
Keep an eye on these changes, prepare for potential impacts, and look for ways to turn these challenges into growth opportunities. As always, staying informed and proactive is the best strategy.
If you have any questions or need personalised advice for your business, don’t hesitate to contact us or book a free 1-2-1 consultation.
