The new tax year
An overview of the new tax year, and for some, a new accounting year. Including:
– the health & social care levy
– increased costs from a business perspective
As I (Ian Kelly) write this column we are supposed to be in Springtime and yet our mini-heatwave lasted less than a week and we are in a longer cold snap which always seems to coincide with the sight of new-born lambs in the fields.
Our tax team has barely had five weeks since the end of a tax season that, courtesy of a 28 day tax return filing deadline extension, lasted ten months, to catch its breath before they and their colleagues from our other service lines start the whole process all over again.
Now isn’t time to talk tax returns – I will return to the topic next month – but to take stock of where we are following Rishi Sunak’s Spring Statement. The detail and my commentary can be read here on this website. Here, I want to pick up on several areas that we ought to be thinking about as we move forward towards Summertime.
To resurrect a soundbite from Budgets of yesteryear, it’s not that long since the boasts were of ‘green shoots’ emerging from the post-Brexit and post-pandemic worlds and of higher growth than anticipated.
The growth forecast has reduced as the inflation rate has increased with a double figure rate within touching distance. The Bank of England’s increasing of the base rate, albeit in bite-sized chunks unlike the digit or two percentage points of the 1980’s, comes not long after an effective negative inflation rate period.
Added to this squeeze are the ongoing increases in the price of heating oil, diesel and petrol which can only be slightly mitigated by Sunak’s five pence a litre softener. The effect of the rising transport costs were already being felt before the Spring Statement on 23 March with the cynics pointing out that regular fuel price rises were outstripping that duty reduction.
There was also confirmation that the health and social care levy would remain and so adding to employment costs whilst reducing the take-home pay of employees.
The penny reduction in the basic rate of income tax is some way off in 2024 and was Sunak’s ‘rabbit out of a hat’ but has to be weighed against the freezing of income tax bands and the personal allowance until 2026.
Many of you in business will have 31 March or 5 April year ends and so will be looking ahead to a second and final year of Covid-affected trading accounts whilst pondering shrinking margins; what amount of increased supplier costs can be passed on; shortages and higher costs; how to best service their customers and the potential for inflation-busting pay rises for their staff.
Your Davies Tracey team is here to support you in dealing with this minefield, so please do not hesitate to speak with your usual contact here.