Has the new Chancellor introduced a “mini-budget” with a bang and what does it mean for individuals?
Kwasi Kwarteng’s delivery of “The Growth Plan 2022” today has focused on the UK Government’s response to the spiralling cost of living experienced by many in the UK. Has the new Chancellor introduced a so called “mini-budget” with a Bang and what does it mean for individuals?
The significant changes announced were:
- The previous July increase to National Insurance rates will be reversed with effect from 6 November 2022.
- The proposed permanent introduction of a Health and Social Care Levy has been cancelled and instead, the Chancellor has prioritised the protection of funding for health and social care services through other means
- The Chancellor announced an acceleration to the proposed reduction in the basic rate of income tax to 19% from 6 April 2023. The Government estimates 31 million people taking home £170 more per annum as a result.
- Alongside this income tax reduction, there will be a four-year transition period for Gift Aid relief, to maintain the income tax basic rate relief at 20% until April 2027.
- Abolishing of the current additional rate of tax of 45% from 6 April 2023, reducing the top rate of income tax to 40%. For Scottish taxpayers, it is important to note this change will not apply automatically to income subject to the Scottish rate of income tax. It remains to be seen whether the Scottish Government will announce a corresponding abolition of the Scottish top rate of income tax, currently 46%.
- As a direct result of the above, the Chancellor announced the proposed increase of 1.25% to all dividend rates of tax, expected from 6 April 2023, will no longer occur. The dividend rate of 38.1% will also be abolished. This will mean dividend rates from 6 April 2023 of 7.5% up to the basic rate threshold and 32.5% beyond that.
- There will be an increase in private sector investment. This includes:
- An increase in the amount of shares which can be granted under a tax beneficial Company Share Option Plan to £60,000 from April 2023 (from the current limit of £30,000).
- An increase in the level of finance which can be raised under the Seed Enterprise investment Scheme to £250,000 from April 2023. This will include a corresponding increase in the gross assets test to £350,000 and an increase in the age of a qualifying company from 2 to 3 years
- The annual investor limit in Seed Enterprise Investment Scheme companies will double from the current £100,000 to £200,000, effective from April 2023
Other Notable Announcements
- The previously announced increase in Corporation tax rates, scheduled to increase to 25% in April 2023, has been abolished and the current Corporation Tax rate of 19% will remain in place going forward.
- Changes to Stamp Duty Land Tax (SDLT), effective from midnight tonight, are:
- An increase in the threshold before SDLT becomes payable from £125,000 to £250,000
- An increase in the same threshold for first time buyers – increasing the limit before SDLT becomes payable from £300,000 to £425,000 on a qualifying property purchase
- The value of a qualifying property purchase is also increased from £500,000 to £625,000
It is important to note these changes apply to SDLT only. The Scottish and Welsh Governments will need to determine whether they will make similar changes in due course.
- The Chancellor announced a new raft of Investment zones to be introduced (with 38 currently proposed in England and a commitment to work closely with Scotland, Wales and Northern Ireland) and the corresponding tax benefits are:
- Businesses in designated investment zones will benefit from 100% business rates relief on newly occupied and expanded premises. Local authorities hosting Investment Zones will receive 100% of the business rates growth above an agreed baseline in designated sites for 25 years.
- Businesses will receive full stamp duty land tax relief on land bought for commercial or residential development (applicable to England only)
- Business in these areas will enjoy a zero rate for Employer National Insurance contributions on new employee earnings up to £50,270 per year.
- There will be a 100% first year enhanced capital allowance relief for plant and machinery used within designated sites and accelerated Enhanced Structures and Buildings Allowance relief of 20% per year.
- Previous reforms to the IR35/off-payroll working announced in 2017 and 2021 will be repealed from 6 April 2023. From this date, workers will again be responsible for determining their own employment status and paying the appropriate amount of income tax and NIC.
- The previously announced bankers’ bonus cap will be removed, with the broad consideration being the current cap provided a barrier to UK financial institutions in attracting the top global talent.
- Interestingly, the Office of Tax Simplification is to be wound down, in favour of a renewed Government emphasis to create a simpler tax system.
- A new digital based VAT free system of shopping for oversees visitors is to be introduced with a view to boosting the ailing high street and creating further jobs in the retail and tourism sectors.