This week’s political headlines have been dominated by the dramatic events at Westminster, where prime minister Boris Johnson was finally faced with a confidence vote following months of speculation. But there may be just as much significance for business tax bills.
No sooner was the four-day Jubilee celebration over than a number of post-dated letters of no-confidence in Mr Johnson were delivered to 1922 committee chair Sir Graham Brady, with the required 15 per cent of the Conservative parliamentary party – 54 MPs – being crossed.
While so much attention was focused on the odds of his survival after the ‘Partygate’ affair, who might replace him if he fell and the extent to which he might be damaged even if he won, the prime minister himself was keen to make new policy announcements in his pitch to the 1922 Committee, including a pledge for new tax cuts.
MPs present will have digested those remarks and an accompanying promise of a new growth strategy to be produced before voting, which may or may not have swayed some and kept the incumbent of Downing Street in place.
Having made such a promise, however, there will be a clear need to make good on it, given over 40 per cent of Mr Johnson’s colleagues voted against him. While Conservative Party rules prevent a challenge taking place for a year, the prime minister will need a good year to be sure of surviving beyond that time, when the next general election will be looming.
A key question is what those tax cuts might involve, a question the next Budget will answer. Every tax accountant and their clients will be watching and this may affect you in a range of ways.
Among the possibilities are cuts to personal taxation, which could be of direct benefit to sole-traders and other self-employed people. That might also go some way to ameliorating concerns over the impact of increases in national insurance to pay for more health and social care spending.
On the other hand, there could be some business tax changes. This could be popular amid significant divisions in Tory ranks over the recent decision to impose a windfall tax on energy firms that had seen a sudden increase in profits after oil and gas prices surged due to sanctions against Russia.
Opponents expressed fears that this could curb investment and this led to Chancellor Rishi Sunak including some breaks for firms making new investments. A bigger threat to this emerged amid the possibility of a legal challenge by energy firms, but this looks to have receded after British Gas owner Centrica said it would not take such a step.
That could provide some more room for business tax changes, as a collapse of the windfall tax would mean finding revenue from elsewhere to pay for the government’s package to help the public deal with rising energy bills.
Whatever the tax cuts will turn out to be, it is important for small businesses and sole traders to work with skilled accountants to establish exactly how they can maximise the benefit of them.