The Truss government had already made the pursuit of economic growth a key focus prior to today’s Mini-Budget by the new Chancellor, Kwasi Kwarteng; so a few big changes were already anticipated.
However, more significant measures were announced than were expected, as the Chancellor ripped up years of tax policy in one of the biggest overhauls of the tax system in recent memory.
Whether or not you agree with the theory that reducing tax stimulates economic growth, the announcements today certainly represent a bold and aggressive pursuit of making the coffers bigger rather than just redistributing what we already have.
Set out below is a brief overview of the key measures announced today, including those that had been trailed in the previous week.
Measures announced in the mini-budget
Corporation Tax
As previously reported, the increase in the level of tax paid by companies making annual profits in excess of £50,000 that was due to come into force from 1 April 2023, which would have impacted around 30% of trading companies, will be scrapped. The rate of 19% will continue to apply to companies of all sizes.
Capital allowances
The level of Annual Investment Allowance that enables businesses to receive full tax relief in the year for investment in plant & machinery will remain at its current level of £1m per annum permanently. This was due to revert to £200,000 from April 2023.
National Insurance
As formally announced yesterday, the temporary increase in rates by 1.25% that came into effect in July, and their planned replacement by the Health and Social Care Levy from April 2023, have been cancelled from November 2022. The related increase in dividend tax rates will also be reversed, so that Income Tax rates on dividends will reduce by 1.25% from April 2023.
Stamp Duty Land Tax
Amounts payable on residential property purchases in England and Northern Ireland will be reduced, by an increase in the nil band from £125,000 to £250,000, and the nil band for first time buyers also increases by £125,000 to £425,000.
Income Tax
The reduction in the Basic Rate for taxpayers resident in England, Wales and Northern Ireland from 20% to 19% that was due to come into effect from April 2024 has been brought forward a year to next April. The Additional Rate applicable to individuals in those countries with income above £150,000 was also announced to be scrapped from the same date, but the Chancellor subsequently changed his mind and the rate will remain at 45%.
‘Off-payroll working’ rules
Recent changes to these for individuals working through their own personal service company, which shifted the burden of determining their tax status and applying tax if appropriate onto the end user, will be repealed from April 2023. These have been in operation since 2017 for end users in the public sector and 2021 for large private sector end users.
Responsibility for deciding how tax applies to their roles will revert to the worker’s own company.
Investment zones
To be created across Great Britain, with a range of tax incentives for businesses that set up within them, including lower tax rates, increased capital allowances, employer NI savings and SDLT reliefs.
VAT
VAT-free shopping to be implemented via a digital scheme for overseas visitors to Great Britain.
Infrastructure projects
Acceleration of getting many infrastructure projects in the pipeline moving, including within South Yorkshire and North Derbyshire the electrification of the rail line through Chesterfield to Sheffield, Supertram renewal and A625 safety improvements.
Do you need advice?
Hopefully the above summary is useful. We will further consider the implications of these changes for our clients and contacts and produce more detailed analysis in due course. You can follow us on Twitter and LinkedIn to receive these and other regular updates.
Please get in touch with the tax team or your usual Shorts contact if you wish to discuss the impact of these measures.
Scott Burkinshaw
Scott is Tax Partner at Shorts, specialising in providing strategic corporate and personal tax advice.
View my articlesTags: Business Taxes
