The new Chancellor delivered what had been dubbed a “mini budget” this morning. Unfortunately there was nothing “mini” about it as Kwasi Kwarteng announced a huge raft of tax changes as well as other initiatives to promote economic growth.
We have set out below some of the key developments that we think are likely to affect you and/or your business. Please note that some of these changes were announced prior to this morning’s announcement.
National insurance contributions (“NIC”)
NIC rates will be cut by 1.25% for employees, employers and the self-employed, effectively reversing the uplift introduced in April 2022, for the rest of the tax year. This cut will take effect from 6 November 2022 and it will cover Class 1 (both employee and employer), Class 1A , Class 1B and Class 4 (self-employed) NICs.
In addition, the ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 will not be going ahead.
Corporation tax
The rise in the main rate of corporation tax to 25% from April 2023 has been cancelled. Corporation tax will now remain at 19% for all companies, regardless of their size.
Income tax
The basic rate of income tax will be reduced from 20% to 19% from April 2023. The additional rate of income tax will be withdrawn from the same date, meaning that individuals earning more than £150,000 will now pay a maximum of 40% income tax on their earnings.
In line with the NIC changes outlined above, dividend income tax rates will also be reduced by 1.25%, thereby reversing the uplift introduced in April 2022. Unfortunately, this change will not take effect until April 2023 and so there is some misalignment with the NIC changes announced earlier this week.
Stamp duty land tax (“SDLT”)
The threshold at which SDLT is payable by residential property purchasers has been increased from £125,000 to £250,000. In addition, the threshold for first-time buyers has been increased from £300,000 to £425,000. These new thresholds are expected to be permanent and take effect from 23 September 2022.
Temporary annual investment allowance (AIA) made permanent
The AIA will be permanently set at £1m from April 2023. This enables businesses to receive 100% upfront tax relief for expenditure on qualifying plant and machinery.
Energy Bill Relief Scheme
The Government has committed to a new six month Energy Bill Relief Scheme for businesses and other non-domestic energy users, including charities and public sector organisations, providing them with a discount on energy prices. It is thought that this scheme will cap the cost per unit at the same level as residential energy prices.
Alcohol duty
Reforms to the existing alcohol duty system will be implemented from August 2023 and alcohol duty rates are being frozen from February 2023.
If you would like to chat about how these changes might affect you, please get in touch.