The Chancellor, Kwasi Kwarteng, has presented his mini-budget and 'The Growth Plan 2022' announcing major reversals to a large chunk of his predecessor's tax policies. Together with a package of tax cuts, these would have greatly benefit owner-managed businesses but almost all were reversed on 17 October 2022.
National Insurance Contributions (NICs)
From 6 November 2022 (or as soon as payroll systems can be changed, if later):
- The 1.25% increase in NICs rates which has applied since 6 April 2022 is reversed.
- Employee rates will return to 12% and 2%, with an employer's rate of 13.8%.
- The self-employed rate will return to 9% and 2%.
- The Health and Social Care Levy, due to be implemented in April 2023, is abolished.
Dividend Tax
From 6 April 2023
- The 1.25% increase in the dividend rates which has applied since 6 April 2022 is reversed.
- Rates revert to 7.5% and 32.5% from April 2023.
- This change is also likely to affect the rate of tax paid by companies on outstanding loans to participators under s.455 CTA 2010, which will reduce too. [Reversed on 17 October 2022]
See Dividend Tax increase reversed
Income Tax
From 6 April 2023
- The basic rate of Income Tax will reduce from 20% to 19%.
- This measure has been brought forward from April 2024. [This proposal was reversed on 17 October 2022]
- The additional rate of Income Tax of 45% will be removed, meaning that the top rate of tax will be 40%*. [This proposal was reversed by the Chancellor on 3 October 2022]
- The additional rate of tax on dividends will also be removed.
- Current additional rate Income Tax payers will benefit from the £500 Personal Savings Allowance from April 2023.
Income Tax: Scotland
- The reduction in the basic rate of Income Tax from 20% to 19% will not apply to non-savings non-dividend income in Scotland as this is set by the Scottish government. [The proposed reduction was reversed on 17 October 2022]
- Similarly, the abolition of the additional rate of Income Tax in Scotland applies only to savings and dividend income as these tax rates have not been devolved.
Stamp Duty Land Tax (SDLT)
From midnight on 23 September 2022:
- The Residential nil-rate threshold increases from £125,000 to £250,000.
- This affects SDLT calculations for all types of residential property transactions, except for First Time Buyers' Relief.
- The nil-rate threshold for First Time Buyers’ Relief increases from £300,000 to £425,000.
- The maximum amount that an individual is able to pay for a home while remaining eligible for First Time Buyers’ Relief, increases from £500,000 to £625,000.
These measures apply to the purchase of residential property in England and Northern Ireland only.
This measure does not apply to Scotland or Wales which operate their own land transactions taxes.
See Stamp Duty Land Tax changes
VAT
A new digital, VAT-free shopping scheme will be created to attract non-resident visitors.
- Non-UK visitors to Great Britain will be able to obtain a VAT refund on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage.
- A consultation will follow. [This proposal was scrapped on 17 October 2022]
Corporation Tax
- The planned increase in Corporation Tax from 19% to 25% in April 2023 will be reversed.
- The 19% rate will continue to apply.
- Diverted Profits Tax was also due to increase from 25% to 31% in April 2023. This measure is also reversed, but Diverted Profits Tax will remain at 6% above the main rate of Corporation Tax at 25%. [This proposal was reversed by the Prime Minister on 14 October 2022]
See Corporation Tax increases reversed
Annual Investment Allowance (AIA) (Capital Allowance)
- The planned reduction in the AIA limit to £200,000 from 1 April 2023 will be scrapped.
- The AIA limit will be permanently set at £1 million.
This announcement comes alongside plans to develop Investment Zones in 38 local authorities in England which will benefit from additional enhanced capital allowances
See Extension to Annual Investment Allowance
IR35 and Off-Payroll Working
From 6 April 2023
- The 2017 and 2021 reforms to Off-Payroll Working in the public and private sectors will be reversed.
- Workers providing their services via an intermediary will once again be responsible for determining their own employment status and paying the appropriate amount of tax and National Insurance contributions under the IR35 rules. [This proposal was reversed on 17 October 2022]
See IR35 and Off-Payroll Working
Company Share Option Plan (CSOP)
From April 2023
- Qualifying companies will be able to issue up to £60,000 of CSOP options to employees, double the current £30,000 limit.
- The ‘worth having’ restriction on share classes within CSOP will be eased, better aligning the scheme rules with the rules in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies.
Seed Enterprise Investment Scheme (SEIS)
From April 2023
- Companies will be able to raise up to £250,000 of SEIS investment. The current limit is £150,000.
- The gross asset limit will be increased from £200,000 to £350,000, and the trading time limit from two to three years.
- The individual annual investor limit of £100,000 will be doubled to £200,000.
New Investment Zones across the UK
- Zones are to be set up in 38 local authority areas in England plus areas to be designated in Scotland, Wales and Northern Ireland.
- They will have designated development sites with relaxed planning controls to release more land for both housing and commercial development.
- Businesses setting up in these zones will benefit from tax breaks including:
- Stamp Duty Land Tax (SDLT), 100% business rates relief, enhanced capital allowances for plant and machinery and enhanced Structures and Buildings Allowance rate and a zero rate of Employers NICs for new employees.
Office of Tax Simplification
- The Treasury's independent tax simplification body is to go.
- The government has now decided that the best way to simplify the tax system is to embed the concept of simplification into government rather than having a separate body to oversee the process.
See Office of Tax Simplification to go
Alcohol Duty
- The government will freeze all duties for one year from 1 February 2023.
- Following consultation, there will be a reform package for Alcohol Duty.[This measure was scrapped on 17 October 2022]
- Small Brewers Relief will become Small Producer Relief and will be extended to small producers of wines, spirits, ciders and lower-strength beers.
Energy
As previously announced, the government will provide two support packages for domestic and business users of electricity and gas.
Domestic users
- Cost of living support package via an Energy Price Guarantee which supports households through a cap on the unit rate of electricity and gas.
- The newly announced support package will run alongside the existing measures already set out:
- £400 per household paid in six instalments from this October under the Energy Bills Support Scheme.
- £1,200 of extra support for the most vulnerable.
Non-domestic and business users
- The Energy Bills Support Scheme will provide support for businesses for a six-month period.
- The scheme will be reviewed after three months.
- There is the possibility of an extension of the scheme for certain businesses after six months.
See Energy Bill Relief Scheme for business
Deregulation
Banker's bonuses
- The EU's cap on bankers' bonuses is to be lifted in the UK.
- The rationale is that it was ineffective as employees received higher base salaries in compensation.
Deregulation of pensions
- Draft regulations to reform the pensions regulatory charge cap will be brought forward, according to the Growth Plan.
- This will give defined contribution pension schemes flexibility to invest in the UK’s most innovative businesses and productive assets creating opportunities to deliver higher returns for savers
Funding for government
According to the Chancellor's Growth Plan:
Inflation
- The Monetary Policy Committee of the Bank of England is responsible for controlling inflation and has taken action by raising interest rates to 2.25%.
- It will begin active sales of UK government bonds to reduce the stock of purchased bonds by £80 billion over the next twelve months.
Funding
- The Debt Management Office Net Financing Requirement (NFR) in 2022-23 has been revised upwards, from £161.7 billion in April 2022 to £234.1 billion in September 2022.
- This will be financed by additional gilt sales of £62.4 billion and net Treasury bill sales for debt management purposes of £10.0 billion, relative to April.
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