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The election is over – what now?

Introduction 

The campaigning is over and we have a new Government, with a significant majority. The result is being described as “historic” and “an earthquake”. 

Good businesses have always looked ahead, so this brief article is designed to help us all think about what happens next year and beyond. 

Assuming the promises are honoured (I make no comment on that!), here’s what we can expect over the next five years, and the action business owners can take now. 

What is in store? 

I am focusing on purely tax and business matters. 

Taxation of income and expenditure 

The Tories have promised to keep income tax and VAT at current rates. The planned cut in corporation tax will be cancelled, so the rate of 19% will remain. There will be a cut in NIC worth £100 next year, and the intention is to increase the cut to £500 by the end of the Parliament. That would mean an increase in the NIC threshold to £9,500 from April 2020 and going to £12,500 eventually. 

This would set the foundation for merging income tax and NIC, but there’s no firm indication that this will be considered. 

In a boost to small business, the limit for the employment allowance will increase from £3,000 to £4,000. This is a real cash saving of £1,000 a year. 

The Digital Services Tax, while not affecting most businesses directly, could lead to increased charges from the “big six” online marketplace providers. 

There is a planned increase to the rate of R&D tax relief, which makes this source of cash/funding an even more important consideration for particularly smaller companies. 

The plans are broadly tax neutral, with a slight increase in the tax take. 

Taxation of capital and wealth 

The “triple lock” pledge on income tax, NIC and VAT lead many to think that capital taxes will be raised. There are changes to CGT already coming into place from 5 April 2020, which will produce a one-off boost to the Exchequer of between £5bn and £8bn in 2020/21. 

The restrictions include a cut in the deemed period of PPR to nine months, and the practical abolition of lettings relief. 

There’s no mention of IHT in the manifesto, but at the last Tory party conference, there was a declaration of intent to abolish Inheritance Tax. Whether this makes its way into the first budget remains to be seen. 

The Tories announced an intention to reduce the maximum SDLT rate from 15% to 7% at their conference in the autumn of 2019. An increase in the threshold to £500,000 would remove a majority of transactions out of the tax net. Again, there’s nothing in the manifesto to tell us if this will be implemented.  

Business matters 

Further business rates reforms are promised, giving targeted reductions of £320m. 

More money is promised to improve the energy efficiency of homes, road repairs and re-opening railways as well as improving flood defences, provides opportunities to businesses in construction, energy efficiency and engineering. There’ll be more funding for childcare, which creates opportunities for expansion of existing providers, and bringing in new providers to the market. 

Action required 

A review of the benefits of incorporating a sole trade or partnership should be revisited. 

Companies which are making small profits should consider disincorporation. (Taking into account the other benefits from limited liability and their individual succession plans). 

Homeowners should weigh up whether to get their property sold before 5 April 2020, or to wait until the possible cut in SDLT which may help to boost the sale price. Owners with a fleet of ten or more letting properties should take tax advice as there may be a way to secure both advantages. 

Businesses which innovate or find ways around technical and other challenges should consider whether incorporation will secure an increasingly valuable R&D tax credit. 

Be ready for a budget in January or early February and look out for a review of the detailed proposals. We’ll be covering live so watch out for (now traditional) coverage! 

Steven Carey 

13 December 2019 

Sarah’s Good news – Good tidings we bring to you and your kin!

After a six-month battle, one of our clients finally received their VAT Repayment from H M Revenue and Customs this week -straight into their bank. This has taken setting up a new bank account and completing and sending numerous forms … but we got there in the end! We now have a very happy client, who will receive all future H M Revenue VAT repayments automatically too!!

Congratulations!

Big congratulations to our Becca who graduated last month with the prestigious Association of Accounting Technicians (AAT) qualification.

A great achievement, and reward for all your hard work – well done Becca!

Exam success!

Our brightest apprentice to date has just achieved a spectacular result of 100% in his ‘Management Accounting: Costing’ exam. Well done to Jake Turner – we’re totally chuffed to have you on board!

Getting their dream home

Donald and Teresa have found their dream home, but were concerned that their recent trading history would prevent them moving. However, because they use our recommended cloud-based software, and allow us to review their progress on a regular basis, we have been able to highlight the data that will allow them to move.

Setting up retirement

A newly wealthy couple met with Steve to discuss a possible property investment. Steve was able to talk them through the wider issues surrounding investment. Subsequently, they have decided to continue their strategy, having considered the alternatives and the changes in tax that Steve put to them. They know that their decision is fully informed and the right one for them.

Breaking up is (not so) hard to do (with the right advice)

We met with a business owner who cannot work with his co-owner. Giving a range for a buyout price, Paul was able to set his strategy, and a plan B in case the business partner chose to stay rather than go!

If you need a chat about your strategy with someone who understand both the financial and emotional factors involved, get in touch.

Setting up a business can be scary

Ben is a young man with a great idea, and the technical skills to implement it. However, he recognised that he needed financial skilled advisers to make sure he didn’t make big mistakes. We talked about what he wanted to achieve, rather than the things we can do, so Ben left knowing we are more interested in him and his business than in crowing about how good we are. (Our clients speak for us!).

If you feel your accountant talks a foreign language, or worse you never see them, get in touch and see how we can help you create the business you want.