Update: This information is out of date. Refer to our newer blog post to read our revision “Latest Mini-Budget Reforms”
New chancellor Jeremy Hunt, who replaces Kwasi Kwateng, has announced a number of changes to the mini-budget. On 17 October Mr Hunt announced a package of changes to the mini-budget, which was first announced by Mr Kwateng on 23 September. A fiscal statement is planned for 31 October. However this announcement was added ahead of schedule in an effort to restore confidence in public finances and steady volatile markets. These are the latest mini-budget reforms and what they mean for you.
Mini Budget Report 2022
The government announced their mini budget on 17 September 2022. Then Chancellor Kwasi Kwarteng said, ‘we need a new approach for a new era, focused on growth’, in his first budget. He aims to build this around these three priorities: reforming supply within the economy, maintaining responsible management of public finances and tax cuts to boost growth. Here we explore what that means.
Basic income tax cut brought forward
National Insurance rates rise reversed
Health and Social Care Levy cancelled
Additional dividend tax rates removed
45% rate of tax will now remain, for those earning over £150,000
Corporation tax increase cancelled
Stamp Duty Land Tax threshold increase cancelled
IR35 measures to be revoked
Energy cost support packages confirmed
Stamp Duty Land Tax thresholds increased
Tax Cuts
Ex-chancellor Mr Sunak had planned to cut the basic rate of income tax from 20% to 19% from April 2024. On the condition that the government meets its own ‘fiscal rules’, meaning targets for borrowing going down. Mr Kwarteng has brought this tax cut forward to April 2023, unconditionally.
45% Tax Rate Will Remain
The chancellor originally announced that he would be cancelling the 45% rate of tax paid by people who earn over £150,000 per year. This decision has now been reversed, after this was criticised for being unfair in relation to the cost of living crisis. The tax cut was also blamed for contributing to the value of the pound falling so significantly. Charities will breathe a sigh of relief, because many depend on the boost they receive from claiming back basic rate tax paid by donors under Gift Aid. You can always continue to provide essential support for our charitable partner B.A.C.A. by working with Prestige Business Management or making charitable donations. Talk to us to find out more information about how this helps.
Dividend Income
The tax rates on dividend income over £2,000 were increased to correspond to the increases in National Insurance Contributions and the planned Health and Social Care Levy. However these increases will now be reversed with effect from April 2023, bringing the lower rate back to 7.5% and the higher rate to 32.5%.
IR35
Also known as ‘off payroll working’, the rules known as ‘IR35’ were introduced to prevent tax avoidance through ‘disguised employment’. An individual working through a company and extracting the profits in the form of dividends could save significant amounts of income tax and National Insurance Contributions in comparison to someone doing the same work as an employee covered by the PAYE system. From April 2023 anyone working through a personal service company will once again be responsible for deciding whether the rules apply to them. The government says that ‘this will free up time and money for businesses that engage contractors, that could be put towards other priorities. The reform also minimises the risk that genuinely self-employed workers are impacted by the underlying off-payroll rules.’
National Insurance
The Chancellor has decided to cancel increases in National Insurance Contributions (NI) from the earliest possible date, which is 6 November 2022. It has been recognised that payroll software may not be able to deliver the reduction to the old rates on time for November, but affected employees can expect to receive a rebate retrospectively with their December pay.
Corporation Tax
The planned increase to corporation tax due to take effect from 1 April 2023 has been cancelled. Rather than rising to 25% from April 2023, the rate will remain at 19% for all businesses, regardless of the amount of profit made.
Energy Costs
Mr Kwarteng confirmed the energy bills support scheme, which will provide a £400 non-repayable discount to eligible households to help with their energy bills over the coming winter.
Stamp Duty Land Tax (SDLT)
From the 23rd September 2022 the threshold of which SDLT is payable has doubled from £125,000 to £250,000. In addition the thresholds for first time buyers will be increased from £300,000 to £425,000 and the maximum value of a property that a first time buyer can claim relief on has risen from £500,000 to £625,000.
At Prestige Business Management we can help your Business
Prestige Business Management can help you understand how these adjustments will affect your business. Call us today on 0203 773 2927.
