Today’s not-so-mini budget announced a raft of measures to cut taxes for individuals, including those that are employed, self employed, retired or in receipt of investment or trust income. No changes were announced to capital gains tax or inheritance tax.
So what were the announcements and what do the changes mean for you?
Income tax and national insurance
The national insurance rate of 1.25% brought in from 6 April 2022 will be scrapped from 6 November 2022 and applies to 5 April 2023. The planned retention of this increased rate through the “Health and Social Care Levy” due to come in on 6 April 2023 has also been scrapped. The change applies across the board – so the self employed, employed and employers will benefit.
The additional 1.25% tax on dividend income will remain in place for the rest of the 2022/23 tax year but this will also be scrapped from 6 April 2023.
The basic rate of personal income tax will be reduced from 20% to 19% from 6 April 2023, one year earlier than originally planned, and the 45% additional rate of income tax will be abolished meaning the top rate of income tax is 40%.
The abolition of the additional rate of personal income tax is also expected to be extended to discretionary trusts.
Although the basic rate of income tax is reducing to 19%, transitional measures have been put in place to retain the 20% tax relief for gifts to charity (gift aid) to April 2027. This will ensure that charities don’t lose out on the reduction in tax rate.
There will also be a one-year transitional period for relief at source pension schemes to permit them to reclaim 20% tax.
So what does this all mean? Clearly, people’s post-tax income will increase but for those of you who may be planning bonuses, taking dividends or making income distributions from trusts, you should take advice on whether you should consider delaying or accelerating certain payments.
Stamp Duty Land Tax
From today, with immediate effect, the threshold from which residential property buyers will pay stamp duty land tax rises from £125,000 to £250,000, meaning no duty is payable on purchases of residential property up to £250,000.
The amount on which first-time buyers start paying stamp duty land tax also increases from £300,000 to £425,000 and the amount on which first-time buyers can obtain relief has increased from £500,000 to £625,000.
IR35
The legislation introduced in 2017 and 2021 will be repealed from 6 April 2023 meaning that, if someone provides their services through an intermediary company, they are responsible for ensuring the correct amount of tax and national insurance is paid.
If you are affected by any of the changes or would like to discuss anything from today’s announcements, or any other tax matter, please get in touch with your usual BHP contact or call 0333 123 7171.
