Mini Budget 2022 – Key Points

by | Sep 28, 2022 | Business Tax, Personal Tax

OCT 2022 UPDATE: During the course of October, the Government announced a series of u-turns in relation the ‘mini-budget’. These u-turns included

  • 45% additional income tax rate to remain indefinitely 
  • Corporation Tax increase (from 19% to 25%) to go ahead in 2023
  • IR35 (off-payroll working) rules to remain in place
  • No reduction in basic rate income tax – rate will remain at 20% indefinitely 
  • Income tax charged on dividends to remain at 1.25% higher until further notice
  • VAT-free shopping for overseas visitors will not now be introduced

All other aspects announced during the mini-budget remain unchanged (for now) but further fiscal announcements from the Government are anticipated in the coming weeks. 

Please see our summary of the Chancellor’s Fiscal Statement (17 October) for a more up-to-date perspective.

On Friday 23 September, the Chancellor Kwasi Kwarteng announced the Government’s mini budget. We have provided a round-up of all the key points, from both a business and personal tax perspective.


Personal Tax

Income Tax

  • There will be a cut in basic rate of income tax to from 20% to 19% from April 2023
  • This cut had been planned for 2024 but has been brought forward

National Insurance

  • The recently introduced National Insurance rise of 1.25% will be reversed from 6 November 2022
  • The Health and Social Care Levy (due to be introduced in April 2023) has now been completely cancelled

Dividends

  • Recently introduced 1.25% increases in dividend tax rates to be reversed from April 2023 (UK wide)
  • The rates will revert to 2021/22 rates of 7.5% (basic) and 32.5% (higher)
  • In line with abolition of additional rate of income tax, dividends previously taxed at additional rate will be taxed at higher rate from April 2023

Stamp Duty

  • There is an immediate cut to stamp duty (SDLT) as of 23 September 2022
  • Stamp duty is no longer payable on the first £250,000, which rises to £425,000 for first time buyers (Previously the thresholds were £125,000 and £300,000 respectively)
  • The Government suggests that 200,000 people will now be exempt from SDLT


Business Tax

Corporation Tax

  • Next years planned increase of Corporation Tax from 19% to 25% is cancelled
  • The rate will remain at 19% for all businesses with profit of £50,000 and above

IR35 Rules

  • The 2017 and 2021 IR35 (off-payroll) reforms will be scrapped
  • It is no longer the responsibility of the employer to decide whether an employee is inside or outside IR35, therefore reducing complexity and cost for businesses
  • The contractor will once again be responsible for declaring and making payment of their tax to HMRC

Infrastructure and Investment Zones

  • The Government is in discussion with 38 local areas regarding the set-up of investment zones
  • Generous tax breaks are on offer to businesses willing to locate in these zones including
    – 100% relief on business rates on newly occupied or expanded business premises
    – 100% enhanced capital allowance relief for plans and machinery for the first year
    – Zero-rate Class 1 employer NICs on salaries for new employees who are paid up to £50,270
    – No stamp duty on land bought for commercial or residential development
    – Enhanced Structures and Buildings Allowance relief of 20% per year

Capital Investment

  • Annual investment allowance (AIA), the amount companies can invest tax free, to remain at £1m indefinitely
  • Business can invest in plant and machinery assets worth up to £1m, allowing them to reclaim 100% of qualifying costs in the year of purchase.
  • Company share option plan (CSOP) will be expanded and businesses using CSOP will be able to issue up to £60,000 of tax-advantaged share options to employees (This is twice the current £30,000 limit)
  • Seed enterprise investment scheme (SEIS) is being enhanced and companies will now be able to raise up to £250,000 of SEIS investment, with the gross asset limit increased to £350,000

Bankers’ Bonuses

  • Rules which limit bankers’ bonuses will be removed with further details to be announced in autumn

Shopping

  • There will be no VAT rate cut for businesses
  • VAT-free shopping for overseas visitors will be introduced with further details awaited
  • Duty frozen on all alcohol categories from February 2023

If you have any queries regarding the mini-budget announcements and the possible impact on you or your business or personal tax affairs, please get in touch with the Kingston Burrowes team.

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