00:00Key takeaways in the budget, all coming up in today's Daily Business Briefing.
00:12Good morning, I'm Mary Thomas, Insider's Editorial Director, and I'm joined today by Colin Abrahams, Tax Partner at MHA. Hello Colin.
00:20Hi there Mary.
00:21So, we had the budget, what's your initial reaction?
00:25My initial reaction is that it could have been worse, but I think many of the provisions had already been trailed by the government,
00:34as the Deputy Speaker sort of highlighted at the very beginning that some of those announcements shouldn't have been made,
00:40but we had a pretty good idea beforehand as to what was coming up.
00:44And this is a budget where the Chancellor said they were asking business to do more.
00:49What are some of those things that they're asking businesses to do?
00:52I think the major announcement is obviously around Employers' National Insurance and the fact that the rate is going up from 13.8% to 15%,
01:04so that 1.2% increase.
01:07But as important really is the fact that the secondary threshold above which Employers' NI actually starts to be charged is reducing from £9,100 to £5,000,
01:20which means that if you had an employee who was on £9,100 and there would have been no Employers' NI payable on them,
01:28now you would be paying £615 of Employers' NI for that person that you wouldn't have previously.
01:36So, when you factor that in with the extra 1.2% increase in Employers' NI, some businesses will be hit very hard.
01:45Do you think businesses will be encouraged by maybe something staying in place like R&D relief and things like that?
01:50Yeah, I think they will.
01:53I think there's still a big debate around R&D tax reliefs as to whether it really does encourage investment.
02:00As we know, a lot of R&D tax relief claims, well, some of them have been quite dubious as to whether there really are research and development.
02:13And I think in many ways that we probably need to take a fresh look at how we incentivise investment.
02:20But they have given stability over this Parliament for the sort of corporation tax regime in general, which would be welcomed by business.
02:28But at the end of the day, it's the overall cost to business.
02:31And the question is, if their costs go up, who ultimately bears it?
02:35Is it the business?
02:36Do they pass it on to customers, to clients?
02:40Or do they reduce their headcount?
02:42Or do they pay increases?
02:45So it's really when the music stops, who actually bears the brunt of the Employer NI increases, for example.
02:52And I know this is a budget set to encourage growth.
02:55And I think one of the things we need is more people starting businesses.
02:59So entrepreneurs, are they more encouraged about things now?
03:06We had a rise in capital gains tax, for example.
03:08How do you think this will affect people?
03:10Yeah, I think that's one of those areas where I think it could have been a lot worse.
03:14And I think that the highest rate of CGT increasing from 20% to 24% on shares is not as bad as it could have been.
03:24And as some commentators had potentially trailed the increases.
03:30But then we learned from, at the time of the coalition government, when they were looking to increase capital gains tax rates,
03:36that there becomes a threshold that if you raise rates above a certain threshold, then people actually just don't sell assets.
03:43And therefore, the take to the Treasury goes down.
03:46I think at 24%, they may have actually got the balance right, I think.
03:51Okay, so you're saying people won't be sitting on their hands, perhaps, waiting for the rate to go back down again, maybe?
03:56Correct.
03:57And for those people where we had what was entrepreneur's relief, now business asset disposal relief,
04:03because the threshold used to have a £10 million lifetime allowance for what was a 10% tax rate.
04:11Now it's only a million.
04:13And that rate is going from 10% this year to 14% next year, and then be taxed at 18% the year after.
04:21So you have to question how effective it really is in overall terms now.
04:26But like I said, CGT, capital gains tax, is one of those areas where it could have been a lot worse.
04:32And what about inheritance tax, where somebody might have thought that they would pass on a business after their death?
04:38What are some of the implications of that?
04:40Yeah, and I think that probably is an area where it's a little more troubling from what we know now.
04:46And again, around the issue of reliefs that are available, so business relief, agricultural relief.
04:54Now the whole essence of these reliefs were where people had a business, a privately owned business,
04:59and if they were to die, if they had an inheritance tax bill,
05:03then often they'd have to sell the business to be able to pay the inheritance tax.
05:08So the fact that now that you're only allowed the first million pounds that will be free of IHT from 2026,
05:15and anything above that million pounds will be taxed at 20%,
05:19the question is, you haven't actually got that value in cash.
05:24It's wrapped up in the value of your shares.
05:27Your business may not be cash generative, but may still have some intrinsic value because of its intellectual property
05:34and what it offers, particularly relevant to technology businesses.
05:38So it's how do people pay their IHT bill when they may not have the cash to pay it in the event of death?
05:44And so, you know, again, it'll be in the detail to see how we deal with that,
05:47whether the government allows IHT to be paid by installments.
05:51But that's troubling, really, to me, because, you know, those reliefs are very, very important.
05:57And it shouldn't be the case that if you die, you have a tax charge that actually could actually put the future of that business at risk.
06:07Were you encouraged by the investment announcements?
06:12So, for example, investments into sectors like aerospace, automotive, into infrastructure as well?
06:17Yeah, I'm all in favour of investment.
06:21But the proof is in the pudding. It's how well do you invest?
06:26And some investments can be good and other investments may not be so good.
06:30And I think government's record on infrastructure spend is not the best.
06:36We've seen a number of IHT projects in government where the spending has been astronomical for systems that don't really work properly.
06:44So as with anything, any investment that's made, you know, we need to get good value for money and it's got to be spent in the right way.
06:52And Colin, your final thoughts about the budget?
06:56I go back to what I said at the beginning, it could have been a lot worse.
06:59I think we've seen a clear distinction now between the previous government and this government.
07:05This government obviously believes that spend by government or a more centrally managed economy is better than one that is left to free market forces, if you like.
07:20And it'll be interesting to see how that pans out.
07:24But yeah, it could have been a lot worse.
07:26Thank you very much, Colin Abrahams, tax partner at MHA.
07:29And thanks to MHA for sponsoring today's video as well.
07:33You can catch more news from Insider on our website, insidermedia.com.
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