Earlier today, the newly appointed Chancellor, Kwasi Kwarteng delivered his mini-budget with the Governments main focus being to boost economic growth and productivity. 

REVERSAL OF PROPOSED CORPORATION TAX INCREASE

The Chancellor confirms the government is scrapping a planned increase in the amount of tax companies pay on their profits. Corporation tax had been due to rise from 19% to 25%, under plans drawn up by previous PM Boris Johnson.

In summary, the planned rise on corporation tax from 19% to 25% is scrapped.

REFORM OF IR35 AND PERSONAL SERVICES COMPANIES (PSC’S)

The Chancellor has announced plans to abolish the IR35 off payroll working rules for the public and private sector from April 2023.

ANNUAL INVESTMENT ALLOWANCE

The Annual investment allowance was due to drop £200,000 but will now remain at £1,000,000.

In summary, businesses can invest up to £1,000,000 in qualifying fixed asset expenditure per annum and received 100% deduction against profits in the year of acquisition.

 

REVERSAL OF NATIONAL INSURANCE INCREASE

The 1.25% increase introduced by Rishi Sunak in April 2022 has been reversed in today’s announcement – this will happen from 6 November 2022 onwards.  This reversal applies to both employees and self-employed individuals.

The reversal will also reduce the level of Employers National Insurance from 15.05% to 13.8% a further saving for businesses.

REVERSAL OF DIVIDEND TAX INCREASE

The 1.25% increase (in line with the NI Health and Social Care Levy introduced by Rishi Sunak) in April 2022 has been reversed in today’s announcement however this reversal only applies from 6 April 2023 onwards. 

In summary, dividend tax rates from April 2023 will be back at 7.5% for the basic rate and 32.5% for the higher rate (currently 8.75% and 33.75% respectively).

BASIC RATE ON INCOME TAX TO BE REDUCED

From 6 April 2023, one year earlier than previously announced, the Government will cut the basic rate of income tax to 19% from the existing rate of 20%.

In summary, the basic rate of income tax will be cut by 1% to 19% from April 2023.

TOP RATE INCOME TAX TO BE ABOLISHED

The highest rate of income tax is currently 45% and paid by those earning over £150,000 – the Chancellor announced today that from April 2023 he would be scrapping the additional rate of tax to have one single higher rate of income tax at 40%.

In summary, the 45% tax rate for top earners over £150,000 will be abolished from April 2023.

The abolishment of the top rate of tax announced also applies to dividend tax rates that are currently 39.35%.

 

The level at which house-buyers begin to pay stamp duty is doubled from £125,000 to £250,000.

First-time buyers will pay NO stamp duty on homes worth £425,000, up from £300,000.

There is an increase in the value of the property on which first time buyers can claim relief, from £500,000 to £625,000

 

Planned increases in the duty rates for beer, cider, wine and spirits have been cancelled.

 

Talks have begun with 38 areas to set up “investment zones" where there will be generous, targeted and time-limited tax cuts for businesses.

The areas which are having talks about being included in the “investment zones” do include Cheshire West and Chester and Liverpool City Region Combined Authority.

The “specified sites” in England will benefit from a range of time-limited tax incentives over 10 years.

The tax incentives under consideration are:

• Business rates – 100% relief from business rates on newly occupied business premises, and certain existing businesses where they expand in English Investment Zone tax sites. Councils hosting Investment Zones will receive 100% of the business rates growth in designated sites above an agreed baseline for 25 years.
• Enhanced Capital Allowance – 100% first year allowance for companies’ qualifying expenditure on plant and machinery assets for use in tax sites.
• Enhanced Structures and Buildings Allowance – accelerated relief to allow businesses to reduce their taxable profits by 20% of the cost of qualifying non-residential investment per year, relieving 100% of their cost of investment over five years."

 

As we have always maintained, with all matters referred to in the Chancellor’s announcements the “devil will be in the detail” and the full impact and understanding of all the announcements will not be made clear until the full parliamentary process has been undertaken and the proposals become law in the relevant finance act.

Last modified on Friday, 23 September 2022