The Chancellor, Kwasi Kwarteng, has announced the biggest parcel of tax cuts in 50 years at today’s ‘mini-Budget’.
He opened his fiscal statement by announcing that the government wants to achieve annual economic growth of 2.5%, which will help deliver higher wages and greater opportunities while funding public services. Here’s a summary of the key changes.
What this means for an individual:
Energy Price Guarantee
An Energy Price Guarantee will cap the unit price that consumers pay for electricity and gas for two years from October 2022. This means the average household should pay no more than £2,500 per year. The price cap is in addition to the £400 support that all households are receiving this winter from the Energy Bills Support Scheme.
Income Tax
From April 2023 the basic rate of Income Tax will be cut from 20% to 19%. The government is also removing the additional 45% rate on annual income above £150,000 from 6 April 2023. This means all earners over £50,270 will be taxed at 40%.
The new rates will apply in England, Wales and Northern Ireland, however Scottish tax rates are set by the devolved government.
National Insurance Contributions (NICs)
Class 1 and Class 4 NICs for individuals are reducing by 1.25% from 6 November 2022. The Health and Social Care Levy that was due to start from April 2023 has been cancelled.
Off-payroll working
The changes to off-payroll working, known as the IR35 rules, are being repealed. From April 2023 off-payroll workers will return to being personally responsible for determining their status, rather than their employers.
Stamp Duty Land Tax
In England and Northern Ireland the minimum Stamp Duty threshold is doubled to £250,000. The first time buyer threshold also increases from £300,000 to £425,000 from today on properties under £625,000.
Alcohol Duty
The government will freeze the alcohol duty rates for wine, beer, cider and spirits from 1 February 2023 to support businesses and help consumers with the cost of living.
What this means for a business:
Corporation Tax
Next year’s planned increase to 25% for businesses with profits over £250,000 has been cancelled. It remains at 19% for all businesses, the lowest rate in the G20.
Energy
An Energy Bill Relief Scheme will reduce prices of electricity and gas for all businesses in Great Britain from 1 October 2022 to 31 March 2023. This will provide a price guarantee similar to that being given to households.
National Insurance Contributions (NICs)
The government will reduce employer NICs by 1.25% from 6 November 2022.
New investment zones
The government is backing the introduction of up to 38 investment zones across the UK, with time limited tax incentives including 100% relief from business rates, employer NIC incentives and 100% first year relief on expenditure in plant and machinery assets.
Promoting business growth
The annual investment allowance will remain at £1m, rather than be cut to £200,000.
The government is planning to simplify the IR35 rules. From April 2023 it will be the responsibility of off-payroll workers to determine their status, rather than their employers.
Company Share Option Plans (CSOP)
From April 2023, qualifying businesses will be able to issue up to £60,000 of CSOP options to employees, double the current £30,000 limit.
Origen’s view:
Consumers and businesses are likely to welcome the caps on energy prices, which give some certainty on future costs and potentially help to reduce soaring inflation. The additional tax cuts announced by the new Chancellor, a mix of new measures and scrapping previous announcements, will lead to everyone keeping more of the money they earn. However, this ‘mini-Budget’ will require significant borrowing and we expect greater scrutiny on how these measures will be funded in the coming months
[ Date Posted: 23/09/2022 14:58:09 ]
