New Chancellor Releases Mini-Budget that’s Tough on Tax, but Kind to Businesses23/09/2022
The new Chancellor of the Exchequer, Kwasi Kwarteng, released his “mini budget” earlier today, and it comes with significant tax cuts and help for businesses. He claimed that the government would never let homes endure soaring energy prices as a result of Vladimir Putin’s war in Ukraine, and that “help is coming” with the rising cost of living.
The chancellor claimed measures announced today include the “biggest package in generations” of tax cuts to send a clear signal that the government prioritises economic growth. Here are the announcements that will be most important to our clients:
Income Tax Cuts
The 40% higher rate will be maintained.
The base rate of income tax will be reduced from 20% to 19% beginning in April 2023.
The chancellor said “we won’t apologise” for focusing on economic growth. For too long in this country, we have indulged in a fight over redistribution. Now, we need to focus on growth, not just how we tax and spend.”
Kwarteng also confirmed the National Insurance rise introduced earlier this year will be cancelled from 6 November 2022.
The government is reversing the 1.25% percentage point increase in dividend tax rates applying UK-wide from 6 April 2023. Alongside the reversal of the Health and Social Care Levy, the ordinary and upper rates of dividend tax will be reduced to 2021-22 levels of 7.5% and 32.5% respectively.
Tax Breaks for Business
According to Kwarteng, the corporation tax rise from 19% to 25% scheduled for next year would be cancelled. It will stay at 19%. He said: “We will have the lowest rate of corporation tax in the G20.”
Reversing the tax increase will return £19 billion to the economy each year. According to Kwarteng, businesses will be free to utilise this to “reinvest, create jobs, raise wages, or pay dividends which support our pensions.”
The temporary Annual Investment Allowance level of £1m will become permanent instead of returning to £200,000 in April as originally proposed.
According to the chancellor, every additional tax on business is ultimately passed on to families through higher prices, lower pay, or a worse return on savings.
Changes in Stamp Duty and Other Taxes
Stamp duty will be reduced for home buyers in England and Northern Ireland, according to media reports this week. The chancellor has stated that it is a “permanent cut” that will take effect today.
There is no stamp duty to pay on the first £125,000 of a property’s valuation under the existing system. It will be increased to £250,000. In addition the threshold at which first time buyers begin to pay residential SDLT will increase from £300,000 to £425,000, and the maximum value of a property on which first-time buyers relief can be claimed will also increase, from £500,000 to £625,000.
In other news, the chancellor has announced the closure of the Office of Tax Simplification (OTS) and has directed all departments to focus on this instead. Other tax-cutting or reform measures include:
In order to modify and eliminate “unnecessary complexity and cost” for enterprises the 2017 and 2021 reforms to the IR35 legislation are being repealed which will see the responsibility for considering IR35 falling back with the intermediary company from April 2023.
Duty rises for beer, wine, and cider are being postponed.
Zones of investment
The chancellor acknowledges the establishment of over 40 investment zones with tax benefits for businesses.
According to him, the government is collaborating with areas such as the Tees Valley, West Midlands, Norfolk, and the west of England to build investment zones.
In addition to the above, Mr. Kwarteng announced a range of other measures, including “strikes legislation” to tackle “militant trade unions” and the acceleration of a number of key infrastructure projects. He said that the government was bringing forward measures to streamline regulations and remove EU legislation in regards to infrastructure. He also said he was scrapping the cap on bankers’ bonuses, which was not working as planned.
Finally, the Chancellor has promised to turn a “vicious cycle of stagnation into a virtuous circle of growth,” and to “unleash the power of the private sector” although he was clear that this won’t happen immediately.
If you want to make sure that you are getting the most benefit possible from the measures announced today, you need to speak to a professional tax expert. At JW Hinks, our friendly and experienced Tax Team is more-than capable of simplifying you and your business’s tax situation, ensuring you fulfil all of your legal obligations without paying more than you need to. Call us on 0121 456 0190 to find out more about how we can help.