Before Friday we were wondering what a “mini Budget” might be. After Kwasi Kwarteng’s speech, it’s now clear that it is a half-hour unveiling of possibly the widest raft of tax changes that have been announced in some years, heralding a clear shift in direction to a low tax, low state system with the aim of taking the brakes off business to create economic growth.
The Chancellor introduced The Growth Plan ahead of a full Autumn Budget in November. This is in stark contrast to the non-event of Rishi Sunak’s Spring Statement earlier this year.
So what has been announced?
Businesses
Business will be welcoming the cancellation of the Corporation Tax increase to 25% and the permanent increase to £1m for the Annual Investment Allowance limit, which gives 100% tax relief for expenditure on plant and machinery. Small start ups will also welcome the announcements of expansion of the Seed Enterprise Investment Scheme and Company Share Ownership Plans, although little detail of these has yet been seen.
There was a clear move to remove red tape with the abolition of the Office of Tax Simplification and the repeal of the off-payroll working legislation. And further simplifications are expected in regard to planning, agriculture and digital sectors.
The roll back of the 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023. From this date, workers across the UK providing their services via an intermediary, such as a personal service company, will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs. Employers will be pleased, but also annoyed that they have wasted years trying to comply with these complex rules.
Investment Zones will be set up which will offer lower taxes in the form of no business rates, no Stamp Duty Land Tax on purchase, no employers NI for new employees up to £50k and enhanced capital allowances for both plant and buildings. The exact locations of these has yet to be decided and so the overall impact to growing the economy may not be far reaching.
Individuals
The abolition of the 45% additional rate of income tax and the lowering of National Insurance may please the higher paid individuals, whilst those paying tax at the basic rate will welcome the acceleration of the reduction from 20% to 19% from 6 April 2023 as opposed to the planned reduction in April 2024.
The reduction in stamp duty land tax for first time buyers, the help announced to assist with energy bills for businesses and individuals, and the cut to alcohol duties will help with cost of living increases but time will tell whether these will be sufficient cuts and just how affordable they are for the Government.
Overall, it remains to be seen whether this significant shift in policy will create the growth that the economy needs, and with an election in two years the clock is ticking.
Emergency Mini-Budget 2022 key measures announced:
- The Energy Bill Relief Scheme will help to cut energy prices for businesses, charities and public sector organisations. The scheme will run for six months and cover energy used from 1 October 2022 to 31 March 2023.
- Government aims to achieve a trend growth rate of 2.5% for the UK economy.
- Government help with energy bills will reduce inflation by around 5%.
- New legislation to streamline complex planning laws.
- Changes are being made to Universal Credit to encourage more people into work.
- Accelerate reforms to the pension rules.
- Removal of the cap on banker’s bonuses.
- New investment zones with 10-year tax benefits such as no stamp duty, reduced NICs and no business rates. Up to 40 places could be designated.
- The planned 6% rise in Corporation Tax to 25% from April 2023 is scrapped. The rate remains at 19%.
- Annual Investment Allowance will remain permanently at £1m.
- Widening the criteria of the Seed Enterprise Investment Scheme (SEIS), including allowing firms to now raise £250,000 under the scheme – 66% more funding than previously.
- The Company Share Option Plan (CSOP) limit allows businesses to offer employees share options worth up to £30,000. This is doubling to £60,000.
- Off-payroll rules to be scrapped from April 2023.
- Alcohol duty will be frozen from February 2023.
- Reversal of 1.25% NIC rise from 6 November 2022 and associated dividend tax rates rise reversed next April.
- Stamp Duty Land Tax is removed from properties worth up to £250,000, or £425,000 for first-time buyers purchasing properties for up to £625,000.
- From April 2023 the basic rate of Income Tax will be cut from 20p to 19p. And the Government will abolish the 45p additional rate completely.
- The Office of Tax Simplification is to be scrapped.
- VAT-free shopping to be introduced for overseas visitors.
Key changes announced ahead of today:
- National Insurance rise will be reversed from 6 November 2022.
- Energy bills help for businesses unveiled.
- New energy help unveiled for households.
- All retained EU laws will be sunset on 31 December 2023.
- HMRC interest rates for late payment of tax rise from 1.75% to 2,25% from 3 October 2022.
Watch our Mini-Budget Webinar with BHP Tax Partner Chris Humphreys here.
If you are affected by any of the changes and would like to discuss anything announced in the mini-Budget or any other tax matter, please get in touch with your usual BHP contact or call 0333 123 7171.
