Steady hand of Chancellor set to stabilise economy

Commentary from Nick Latimer, Private Clients Partner in the Cheltenham office of national audit, tax, advisory and risk firm Crowe


Fiscal responsibility was the name of the game today given recent instability in policy and the markets – and I think Jeremy Hunt held the line and secured that process today.

The measures announced to freeze thresholds out as far as 2028, and reduce the level at which the 45% rate of tax for the highest earners kicks in to £125,000, will have a significant impact on the Government’s tax take over time in an inflationary environment which, along with spending cuts, may help to fill the “black hole” created by increased interest rates and the war in Ukraine.

This is not a new strategy but one that has been found to work in the past in a stealthy manner.

The reduced dividend exemption, to £1,000 in 2023 and £500 in 2024, will add further pain for SME business owners who are used to extracting profits by way of dividend, and who are still hurting from the cancellation of the planned reduction of 1.25% which has been applied to national insurance.

In good times, increases in dividend tax might encourage further re-investment of business profits, particularly at a time when corporation tax rates are increasing to 25% – but in a period of recession it is also tempting to delay investment.  This will also hurt those who are already struggling in the post COVID environment, particularly those in the hospitality and leisure sector.

It was also disappointing that the Government will be scaling back tax relief on R&D investment by SMEs from 130% to 86%, and the credit rate to 10%, at a time when we need to transform our economy through innovation. This is on top of previous measures to restrict relief to UK based activities.

It appears that more incentives will be provided by the Government to target relief more appropriately to growth enhancing industries, but we are yet to see the detail.

An increase in the main rate of Capital Gains rate was the subject of much speculation before today – thankfully this did not come to pass.

But the reduced tax free annual allowance from over £12,300 today, to only £3,000 in 2024 will add £2,500 extra of tax for those at the top end of a capital gains tax bill.

This, on top of the reduced dividend exemption, will drag more people into filing self-assessment tax returns annually, at least until the Government’s long-trailed transition to a digital world is implemented.

Finally, it was a relief that the Government did not make further tinkering changes to pension tax and inheritance tax.

If changes are to be made in these areas, more significant reform is needed, as part of a longer term tax simplification agenda and review of retirement planning and capital succession. This is yet to be set out by this government and is unlikely to happen in the short term.

Overall my feeling is that this was the fair Budget that was trailed by the Prime Minister. My hope is that the Chancellor has done enough to steady the ship and provide the stability and certainty that people and businesses are crying out for.



  • Miriam Sherwood, Director, People Communications & Marketing, Crowe UK. Tel: (0)121 543 1900,

Notes to Editors:

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