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    Tag: Budget

    Jane Parry’s thoughts on the 2023 Spring Budget

    Posted on by Katie Heaton

    Jane Parry, managing partner and head of tax, at Blackburn and Bury-based PM+M: The Government is facing some tough challenges, but this Budget has only gone a small way to really addressing them.

    The Government is treading a fine line between a ‘technical recession’ and minimal growth so anything that would have caused even the tiniest of negative shockwaves was never going to happen – especially as the economy is still recovering from last year’s ‘Trussonomics’ debacle.

    The OBR’s announcement that it has cut its inflation forecast for the end of this year to 2.9% and that the spending deficit improved after a rise in tax receipts, mainly due to higher than expected inflation, certainly gave the chancellor some breathing room as he will have as much as £30bn spare. I’m sure some of it will be used to cover the billions that will be needed to pay for the newly announced 30 hours of free childcare for all children over nine months as well as the other increased child support initiatives.  However, my feeling is that he will probably ringfence the rest for some major spending announcements in the run up to next year’s general election.

    The hype before the Budget was all about incentivising people back to work – especially those in their 50s. The main thrust of that was around tackling the so-called ‘pension trap’ which has led to many professionals including – most notably – NHS consultants and GPs to take early retirement. Hunt has increased the amount that can be set aside tax-free each year, and the cap on how much can be saved tax-free has been abolished all together which was a surprise. The annual allowance, which is the most a worker can save in their pension pots in a single year is set to rise from £40,000 to £60,000. This will, of course, only affect the wealthiest and will have no impact on ordinary workers. I can see his logic, but I do think more will need to be done for lower and middle earners over the next few years. Especially as the freeze to personal allowances is pushing more and more people into higher-rate tax bands.

    The reform of disability benefits is very welcome.  I also believe a plan should be put in place to directly tackle the current benefits trap which sees something like a 98% effective tax rate on some universal credit claimants where their income increases, and their universal credit and housing benefits get clawed back.  That’s a massive disincentive for working longer or harder which really needs changing if we want to see some productivity shifts in the UK workforce. We’ve also got some crippling student loan interest rates affecting young people (some of them are at 9%) which generate seemingly endless repayment profiles and can act as a disincentive for increasing earnings for some.

    The tech and innovation spaces are still a key growth areas for the Government so it was positive to see the news that a series of hubs around the UK will receive extra funding to boost business investment in the regions. In the North West, Greater Manchester Mayoral Combined Authority and Liverpool City Region Mayoral Combined Authority will benefit but there’s no provision for Lancashire which is a shame, as it also boasts thriving tech and innovation sectors.

    For larger businesses, the surprise announcement that full expensing for capital investment in technology, plant and equipment will come in from 1 April was welcome.  For smaller businesses whose capital expenditure falls within the current £1m annual investment allowance, this will be irrelevant.

    There was an interesting spin on the announcement of “additional” tax support to help loss making research & development intensive SMEs, meaning that for every £100 spent on R&D, those eligible companies will be able to claim £27 back.  This sounds great, but in the context of the wholesale reform of the R&D scheme which is happening in the background with the considerable dilution of the currently very generous SME scheme, it isn’t that great.  Currently all such loss-making SME companies could claim £33 cash back for that expenditure.  Going forward, other companies who don’t meet the R&D intensive criteria will only be able to claim back £18.60 under the new regime.

    It feels like the chancellor has missed the opportunity to really revitalise the R&D Tax credits regime into more of a real time system which incentivises and facilitates world class R&D by UK businesses.  Instead, we’ve got a watered-down version of the old regime, with less benefits to the cutting edge SME’s which are driving innovation in our region.

    It’s also a shame the chancellor didn’t reconsider his decision last year to more than halve the capital gains annual exemption which takes effect on 6 April.  It’s a measure which will affect a swathe of smaller investors, many of them pensioners, and will drag many back into needing to incur the costs of submitting personal tax returns, for very little overall benefit to the exchequer.

    The Government is facing some tough challenges, but this Budget has only gone a small way to addressing them and the real needs of businesses are still largely being ignored.

    Mini-Budget Response: Jane Parry, managing partner of PM+M: “The jury seems to be out on whether Trussian economics have much validity.”

    Posted on by Katie Heaton

    Following the Chancellor’s mini-Budget, PM+M’s managing partner, Jane Parry, has provided her thoughts on what this could mean for businesses and individuals…

    On the face of it, today’s barrage of tax cuts – including the basic rate of income tax cut and the abolition of the 45p additional rate – will be welcomed by some, but we are talking about some truly eye watering sums that are being added to the national debt. Some of the world’s leading economic voices and leaders believe this form of ‘trickle down’ economics is deeply flawed and will put the public finances on an unstable footing for years to come, and I am with them. Especially when compounded by the lack of an energy company windfall tax which is, in my view, pretty shameful.

    The news that corporation tax will stay at 19% is good news for businesses struggling with mounting costs, but – of course – it will only be benefit to companies that are actually making a profit. The energy price cap for business is a positive step but it’s still a chunky hike in costs and the real issue is that it gives no long-term certainty, which is what firms need. If there’s no de-escalation of the war in Ukraine, or it gets worse, then this move will be nothing more than kicking the can down the proverbial road. It’s simply impossible for businesses to make strategic and long-term decisions in this environment which is complex and ever changing.

    However, there was some welcome certainty on making the £1m Annual Investment Allowance for capital equipment expenditure permanent, thus avoiding the regular speculation about see sawing thresholds which hampers long-term business decision making. The promised enhancements to the venture capital investment schemes are also welcome.  Let’s hope those bankers start to invest their larger bonuses in UK businesses as a result.

    In terms of the NI reversal, it sounds great, but it will only help those who pay NIC and of course the benefit is skewed towards higher earners, so the really low earners in society won’t see much benefit at all.  Also, the practicalities of the reversal could prove a headache for payroll providers and also company directors and the self-employed who probably face some form of blended NI rate on their profits for this year.

    The Chancellor’s commitment to cutting business red tape and bureaucratic costs is great, but there was no mention of the relentless march of the Making Tax Digital and basis period reform programme which is due to hit the self-employed and landlords from April 2024, adding significantly to their costs of compliance.  The major accountancy bodies have already started telling the Chancellor that the system won’t be fit for purpose in time and will just create more headaches for business to distract them from their growth focus. I hope he listens, and we see something in the main November Budget on this.

    Much has been made about the stamp duty cut which sounds fine but again will only impact a few; namely those who are buying a house and particularly first-time buyers. With the cost-of-living spiralling and interest rates rising, you’ve got to be pretty brave to commit to a new mortgage just now if you’re an ordinary working person.

    The new Investment Zones are welcomed although much of today’s statement will have a disproportionate benefit for the South East.  Whether the Investment Zones are sufficient to achieve some levelling up remains to be seen.

    Overall, we are seeing some see-sawing of policies and the jury seems to be out on whether Trussian economics have much validity. The Treasury’s decision to not release the OBR’s predictions are concerning to me as is the issue of making all these tax cuts to stimulate demand whilst not changing the Bank of England’s remit on inflation, so that it will be forced to increase interest rates further. It’s going to be interesting to see how the markets react to this approach.

    We are living in strange times – we should enjoy these short-term savings whilst we can, but we must all keep a sensible eye on the realities we face and potentially batten down the hatches for what is likely to be a turbulent few months or years ahead.

    Budgeting – how to achieve more from your money

    Posted on by Laura Boyd

    Budgeting can be a fantastic tool to help your money go further. In our latest blog we highlight the basics of budgeting and how you can make the most of your hard-earned cash.

    How to get started

    • Calculate your income after tax

    Most people know their salary, but it is important to note down your take-home pay – which is how much money you take home after tax and other deductions. You should also include any means of income outside of your salary.

    Knowing how much money you have after tax will make budgeting a lot easier.

    • Track your spending

    You should categorise your spending to identify where most of your money is spent. This will help you determine which expenditure will be easiest to cut back on.

    Start by listing all your fixed spending – things like monthly bills, rent, mortgage and vehicle payments. Knowing how much you spend on these can be helpful when budgeting.

    Then, list your variable expenses – things that are likely to change from month-to-month, such as groceries, fuel, and entertainment. Typically, your variable expenses are likely to be the easiest to cut back. The best way to begin managing and tracking your variable expenses is by looking through your credit card and bank statements and categorising your spending, from most required to least required.

    Make a plan

    When you have a good idea of what you are earning against what you are spending – make a plan. Examine where your money is going, and whether you have the capacity to cut back on any of your expenditure.

    The first things you should think about cutting back on are commodities: the things you want but do not really need. Perhaps you can spend a night watching a movie at home instead of going out to the cinema? Or produce a more budget-friendly meal at home rather than spending in a restaurant? Try adjusting your numbers to see how much you can afford to cut back.

    If you are spending more than you are earning, or if your budget isn’t allowing for as much freedom as you would like, try to scrutinise your expenditure in more detail. You may even benefit from adjusting your fixed expenses – but this can be harder to do if you are in fixed contracts, for example.

    Pitfalls to budgeting

    At the beginning of your budgeting journey, it is easy to become overwhelmed.  Consider the possible pitfalls of budgeting outlined below:

    • Overestimating your income: it is easy to look at your income and forget about any deductions. In which case, you will overestimate the amount you earn, and you may be planning to spend money you do not have
    • Underestimating your expenses: it is important to be vigilant with your expenses. Although it is easy to ‘cheat’ your budget, this will not help you manage your money. You may benefit from writing a daily budget entry on paper or on your phone – quickly jot down any daily expenses and at the end of the month, calculate and reflect on what you have been spending.
    • Not having a strategy: when starting your budget, consider what you want to achieve, do you want to save money for a rainy day, pay off your debts or something else? Having a strategy for your budget is important to help you achieve your goals. For example, if you unexpectedly require money due to an emergency, it would be convenient to have savings which you can fall back on. As such, you may want to add savings to your list of ‘expenses’ to plan for this eventuality.  Alternatively, you may want to see some more growth from your money and be interested in investing – if this is the case, speak to an expert to find out how they can help your money go further.  Remember to keep in mind that investments can fluctuate with market volatility.

    Budgeting can be a fantastic way to manage your expenditure and essentially save money. By planning carefully, and being strategic with your budget, you can achieve more from your money.

    Jane Parry’s thoughts on the 2021 Budget

    Posted on by Rebecca Campbell

    Following the Chancellor’s Budget announcement this afternoon, Jane Parry, PM+M’s managing partner has provided her thoughts on what this could mean for businesses and individuals.

    The Chancellor was hugely positive in his Budget Speech but actually this Budget threw up no real surprises which was mainly due to the numerous ‘leaks’ that some may cynically argue was an attempt to steer the media narrative in advance of today.  There was lots of great news around boosting spending across the public sector.  However, the Chancellor is very clearly pushing the burden for paying for that onto business, with the National Living Wage Increase and scheduled corporation tax rate increases adding a significant burden to business.  He seems to be banking on this plus the benefits of economic growth increasing the overall tax take to fund us out of Covid.

    From April next year, firms employing people on the National Living Wage will be facing more than an 8% increase in the cost of employing people when you combine the rise in the National Living Wage and the introduction of the Health and Social Care Levy. The limited tax reductions announced today, such as the reforms to business rates and the cancellation of the planned increase in the multiplier, won’t do much to allay their impact on the industries that have been hit the hardest including those employing the lowest paid workers. These are the very sectors that have already been pushed to breaking point over the past 18 months and are still facing chronic people shortages and rising energy costs. Despite these pledges, they will have the unenviable, and potentially critical decision, of whether they absorb or pass on these costs to their customers simply in order to survive.

    Whilst the extension of the enhanced annual investment allowance for capital expenditure is welcomed, it will affect relatively few businesses. The planned 2023 increase in Corporation Tax from 19% to 25% will add significantly to the tax burden faced by companies of all sizes.

    The next phases of Making Tax Digital and basis period reform for unincorporated business will add to the tax compliance burden faced by business owners, heaping even more financial pressure on the UK’s already strained SME sector. Whilst a move to real time tax reporting can’t be argued against, the Government needs to be careful to minimise the impact on businesses.

    When you combine all these factors, there’s no question the next few years will be tough, and the government needs to acknowledge that and do more.

    The announcements around innovation investment and modernising the UK’s R&D tax reliefs sound good in principle, but more detail is needed so a true assessment of their long-term value and impact can be made.

    The Levelling Up agenda is another area that needs further work and thought as it appears the government’s view is that levelling up the North West stops at the boundaries of Greater Manchester. The news that Greater Manchester will be given £1 billion to transform its public transport system is fantastic, but what about the rest of the region? Transport infrastructure in Lancashire, Cheshire, Cumbria and Merseyside still falls well behind their Mancunian neighbours. The ability to move easily, reliably, and cheaply between the region’s other hubs like Blackburn, Preston, Burnley, Bolton, Blackpool, Liverpool, Chester and Carlisle is still woeful. Only when this glaring discrepancy is addressed will levelling up here in the North West truly be a thing that can be taken seriously.