In what’s been called the biggest tax-cutting event in 50 years, Kwasi Kwarteng has taken some very broad measures in today’s ‘mini budget’, drawing much comment from financial and economic experts.
In a brief summary, this is what it means for you day-to-day and for your business affairs.
Promised by the previous chancellor, Rishi Sunak, by the end of Parliament in 2024, Mr Kwarteng has brought forward a reduction in the basic rate of income tax, which will now reduce by 1p in the pound from April 2023. This brings basic rate income tax down from 20p in the pound, to 19p in the pound, which equates to an average gain of £125 per year for basic rate taxpayers and £377 per year for higher rate taxpayers.
Notably, the 45% higher income tax rate, currently paid by people earning more than £150,000 a year, will also be abolished from April 2023 meaning that 40% will now be the maximum income tax rate. This rate applies to anyone earning more than £50,270 per year.
This change does not apply in Scotland.
The 1.25% increase to employer, employee and self-employed National Insurance contributions which was brought in by the Government in April of this year, will be reversed from 6 November 2022.
Originally, this 1.25% NI rise was due to be replaced by a new 1.25% Health and Social Care Levy from April 2023 but this has now been scrapped and is due to be funded by general taxation instead.
This reversal will benefit anyone with earnings above £12,570 per annum.
The planned increase to the Corporation Tax rate, from 19% to 25%, has been cancelled. Whilst this is good news for businesses, in real terms, the reversal will only benefit larger businesses.
The annual investment allowance (AIA) which has changed numerous times in recent years, will remain at £1m, rather than falling to £200,000 as previously planned.
A permanent cut in stamp duty for England and Northern Ireland was also announced, with particular benefits for first time buyers. From today, the threshold at which stamp duty becomes payable has been increased from £125,000 to £250,000.
First time buyers will benefit from an increased initial threshold, with no stamp duty payable on the first £425,000 of a property’s purchase price. This having been increased from the previous £300,000. The first-time buyer relief will apply to properties worth up to £625,000, compared with the previous £500,000.
In another U-turn, the Government has repealed reforms to the off-payroll working rules, known as IR35, from 6 April 2023. After this date, workers who provide their services via an intermediary will be responsible for determining their own employment status and ensuring they pay the correct amount of income tax and national insurance.
The IR35 reforms received much criticism when introduced in 2017 and amended in 2021.
The creation of new Investment Zones in 38 areas around England was also announced, although we don’t know exactly where these will be as yet or the full detail of the benefits.
From the information which is available, we understand that temporary business tax reliefs will be made available to increase economic activity in certain areas.
The Seed Enterprise Investment Scheme (SEIS) will be available to more companies from April 2023. The gross asset limit will increase from £250,000 to £350,000.
Currently a company’s trade must be no more than two years old - this will increase to three years.
The annual investor limit will double to £200,000.
News, updates and tips – what do the latest accountancy and tax changes mean for you?
In what’s been called the biggest tax-cutting event in 50 years, Kwasi Kwarteng has taken some very broad measures in today’s ‘mini budget’. In a brief summary, this is what it means for you day-to-day and for your business affairs.
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