OCT 2022 UPDATE: During the course of October, the Government announced a series of u-turns in relation the ‘mini-budget’. These u-turns included
- 45% additional income tax rate to remain indefinitely
- Corporation Tax increase (from 19% to 25%) to go ahead in 2023
- IR35 (off-payroll working) rules to remain in place
- No reduction in basic rate income tax – rate will remain at 20% indefinitely
- Income tax charged on dividends to remain at 1.25% higher until further notice
- VAT-free shopping for overseas visitors will not now be introduced
All other aspects announced during the mini-budget remain unchanged (for now) but further fiscal announcements from the Government are anticipated in the coming weeks.
Please see our summary of the Chancellor’s Fiscal Statement (17 October) for a more up-to-date perspective.
On Friday 23 September, the Chancellor Kwasi Kwarteng announced the Government’s mini budget. We have provided a round-up of all the key points, from both a business and personal tax perspective.
Personal Tax
Income Tax
- There will be a cut in basic rate of income tax to from 20% to 19% from April 2023
- This cut had been planned for 2024 but has been brought forward
National Insurance
- The recently introduced National Insurance rise of 1.25% will be reversed from 6 November 2022
- The Health and Social Care Levy (due to be introduced in April 2023) has now been completely cancelled
Dividends
- Recently introduced 1.25% increases in dividend tax rates to be reversed from April 2023 (UK wide)
- The rates will revert to 2021/22 rates of 7.5% (basic) and 32.5% (higher)
- In line with abolition of additional rate of income tax, dividends previously taxed at additional rate will be taxed at higher rate from April 2023
Stamp Duty
- There is an immediate cut to stamp duty (SDLT) as of 23 September 2022
- Stamp duty is no longer payable on the first £250,000, which rises to £425,000 for first time buyers (Previously the thresholds were £125,000 and £300,000 respectively)
- The Government suggests that 200,000 people will now be exempt from SDLT
Business Tax
Corporation Tax
- Next years planned increase of Corporation Tax from 19% to 25% is cancelled
- The rate will remain at 19% for all businesses with profit of £50,000 and above
IR35 Rules
- The 2017 and 2021 IR35 (off-payroll) reforms will be scrapped
- It is no longer the responsibility of the employer to decide whether an employee is inside or outside IR35, therefore reducing complexity and cost for businesses
- The contractor will once again be responsible for declaring and making payment of their tax to HMRC
Infrastructure and Investment Zones
- The Government is in discussion with 38 local areas regarding the set-up of investment zones
- Generous tax breaks are on offer to businesses willing to locate in these zones including
– 100% relief on business rates on newly occupied or expanded business premises
– 100% enhanced capital allowance relief for plans and machinery for the first year
– Zero-rate Class 1 employer NICs on salaries for new employees who are paid up to £50,270
– No stamp duty on land bought for commercial or residential development
– Enhanced Structures and Buildings Allowance relief of 20% per year
Capital Investment
- Annual investment allowance (AIA), the amount companies can invest tax free, to remain at £1m indefinitely
- Business can invest in plant and machinery assets worth up to £1m, allowing them to reclaim 100% of qualifying costs in the year of purchase.
- Company share option plan (CSOP) will be expanded and businesses using CSOP will be able to issue up to £60,000 of tax-advantaged share options to employees (This is twice the current £30,000 limit)
- Seed enterprise investment scheme (SEIS) is being enhanced and companies will now be able to raise up to £250,000 of SEIS investment, with the gross asset limit increased to £350,000
Bankers’ Bonuses
- Rules which limit bankers’ bonuses will be removed with further details to be announced in autumn
Shopping
- There will be no VAT rate cut for businesses
- VAT-free shopping for overseas visitors will be introduced with further details awaited
- Duty frozen on all alcohol categories from February 2023
If you have any queries regarding the mini-budget announcements and the possible impact on you or your business or personal tax affairs, please get in touch with the Kingston Burrowes team.
