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Chancellor Kwaski Kwarteng’s growth focused September 2022 Mini-Budget announced some significant changes.
The main aim of the Mini-budget is to boost growth in the UK, supporting the government’s Growth Plan 2022. This growth is being achieved through a balance of tax cuts and incentives for investment, some of which are undoing previous plans or current legislation. Here are some key areas which may affect you or your business.
The reversal of the National Insurance increase was already announced in advance of the budget as well as the scrapping of the new Health and Social Care Levy. This means the extra 1.25% that was introduced in April 22 will be removed from 6 November 2022.
The basic rate of income tax will be reduced from 20% to 19% from April 2023. This change was already planned but originally for April 2024, so it has been brought forwards a year.
At the top end of income tax there are also changes. The additional rate of 45% will be removed from April 2023. Earnings under £50,270 will fall into the basic rate of 19% and above that they will be taxed at the higher rate of 40% for 2023-24. There will be no additional rate.
These changes do not apply to Scotland where the income tax bands are different.
Just as the Heath and Social Care Levy increase in National Insurance has been removed, as will the 1.25% increase in tax on dividends that happened at the same time. From April 2023 the dividends will go back to being taxed at 7.5% and 32.5%.
If you are buying a home then you can benefit immediately from a doubling of the stamp duty threshold from £125,000 to £250,000. This means there is no stamp duty due on the first £250,000 of the property value and this change is effective straight away. This change gets rid of the 2% rate that used to be charged between £125,000 and £250,000 of the property value. Now the whole value up to £250,000 is at 0% and then £250,000 to £925,000 is charged at 5%, the same as previously.
First time buyers now pay no stamp duty up to £425,000 and then 5% up to £625,000. This used to be 0% to only £300,000 and then 5% to £500,000 so they are getting an extra £125,000 with no or reduced stamp duty.
The planned rise in Corporation tax rates to 25%, due in April 2023, has been cancelled and it will remain at the current 19%.
The IR35 rules for off-payroll working that affect many contractors will be simplified. There will be a move back towards workers determining their own employment status (rather than the business or public authority that they are working for). The 2017 and 2021 changes will effectively be undone.
The recent announcements about the Energy Price Guarantee, (caps the unit price for electricity and gas from October 2022) and Energy Bills Support Scheme (£400 support for energy bills) helped to support domestic households in relation to the high energy prices.
The budget outlined further support for businesses in relation through a new six month Energy Bill Relief Scheme. This will provide a discount on energy prices for businesses (and other non domestic energy users).
The government will also make interventions in the energy market to try to bring down the wholesale prices, reduce disruption to the market and generally introduce measures of reform. There will also be increased support available for energy efficiency measures and renewable heating investments.
The annual investment allowance is to remain at the current level of £1m.
The government is aiming to encourage investment in infrastructure by changing the planning system and restrictions in relation to certain types of projects.
Regional investment zones will have reduced taxes or additional tax benefits over the next 10 years to encourage investment and growth in specific geographical areas.
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