The Chancellor used his mini-budget to announce a broad range of measures to support individuals and business and reduce taxes
Kwasi Kwarteng has moved to reverse previously announced tax rises and to announce a number of taxation reductions and incentives.
Reversal of previously announced tax increases
The increase in National Insurance of 1.25% for employers and employees that applied from April this year was offset for some employees by the increase in the National Insurance thresholds from July. Mr Kwarteng has cancelled this increase for employees and employers from November and the proposed Health and Social Care Levy that was due to come in from April 2023 has been abolished. The changes will save an employee earning £30,000 per annum approximately £18 per month.
In addition, the 1.25% increase in taxation on dividends that came in from April, will be removed from April 2023.
The main rate of Corporation Tax was due to increase from 19% to 25% from 1 April 2023 and the Chancellor has announced that this increase will not happen with the rate of Corporation Tax remaining at 19%.
Support for fuel bills
The Government have previously announced support for non-domestic organisations as prices are capped for 6 months from 1 October at 21.1p per KWh for electricity and 7.3p per KWh for gas and will be reflected in the fuel bills issued. It will apply to fixed contracts entered into after 1 April 2022 and to variable and flexible tariffs and contracts for the fuel used from 1 October 2022 to 31 March 2023. The Government states that this level is at half the anticipated wholesale fuel prices for this winter. However, the standing charge is not subject to any cap. In addition, there will be a review published in 3 months to identify vulnerable organisations and industries that will require further support after 31 March 2023.
The support for home fuel bills will limit the average home’s fuel bill to £2,500 per annum for the next two years and the £400 discount on energy bills will also apply this October.
Change in Income Tax Rates
The Additional Rate of Tax of 45% will be abolished from April 2023 and the maximum rate of Income Tax will be 40% on earnings above the basic rate threshold.
The previously announced decrease in the basic rate of income tax from 20% to 19% has been accelerated and will come in from April 2023. There will also be a 1% reduction in the tax rate on dividends at the basic rate meaning that, from April 2023 the tax rate applying will be 6.5% down from 8.75% in the current tax year and when factoring in the removal of the 1.25% health and social care levy. The higher rate on dividends will be 32.5% down from 33.75% in the current tax year.
Changes for businesses
The Annual Investment Allowance that allows a business a 100% deduction on up to £1m of plant and machinery acquisitions was due to reduce to £200,000 from April 2023 but this will now remain at £1,000,000 and this will be a permanent level, encouraging businesses to invest in new plant and machinery.
40 Low Tax Investment Zones are to be introduced around the country and businesses operating in these areas will benefit from 100% relief on the acquisition of plant and machinery, 20% relief on Structures Building Allowance, SLDT relief on land acquired in the zones for commercial or residential development and a zero rate of employers National Insurance Contributions on new employees earnings up to £50,270 per year. The Government is discussing the location of these with 38 local authorities in England and will work closely with devolved administrations to deliver similar benefits.
Other tax changes
The point at which an individual pays Stamp Duty Land Tax on the acquisition of residential property has increased from £125,000 to £250,000 and for first time buyers the point at which they start paying Stamp Duty land Tax has increased from £300,000 to £425,000 and applies on properties up to £625,000 and these changes will apply from today.
The reforms to off-payroll working are to be repealed and simplified to remove complexity for businesses in using self-employed contractors.
The proposed increase in alcohol duties is cancelled.
The cap on bankers bonuses has been abolished.
Overall not really a mini-budget!
If you have any questions on how the budget changes impact you then please contact your local partner on 0330 088 7111