With much speculation over the direction of the new leadership, today the new Chancellor, Kwasi Kwarteng unveiled his plan with an Emergency mini-budget with a raft of tax cuts aimed at businesses. We’ve read through the documents and have created a summary highlighting the key points.
Corporation Tax
- Planned rate rise cancelled, so CT will remain at 19% going forward, regardless of the level of taxable profits.
- Annual Investment Allowance (which provides 100% relief for qualifying expenditure) threshold will be permanently set at £1m, rather than dropping to £200k from 1 April 2023 as previously planned.
Income Tax and National Insurance Contributions
- Basic rate of income tax will be cut to 19% from 6 April 2023 (rather than April 2024 as previously announced).
- Additional rate of income tax (previously 45% above £150k) will be abolished. From 6 April 2023 there will be a single ‘higher rate’ of income tax of 40%.
- The dividend additional rate will also be removed to align with the dividend upper rate, which is being reduced to 32.5%, from 6 April 2023.
- Those who would have otherwise been additional rate taxpayers will, from April 2023, benefit from a Personal Savings Allowance of £500, in line with higher rate taxpayers. This was not previously available to them.
- Health and Social Care Levy, initially introduced via a 1.25% rise in National Insurance contributions (which took effect in April 2022) will be cancelled. This will be delivered in two parts:
- Reduction of NI rates from 6 November 2022 (in effect removing the temporary 1.25% increase for the remainder of 22/23 tax year) (Please note this will not apply in Scotland)
- The 1.25% Health and Social Care Levy will not come into force as a separate tax from 6 April 2023 as previously planned.
- As a result of the NI changes, self-employed people and company directors will pay a blended rate of National Insurance in 22/23 – taking into account the changes in rates throughout the year – when they submit their annual self-assessment return.
- From 6 April 2023, the 1.25% increase to the rate of income tax on dividends (which took effect in April 2022) will be reversed.
Stamp Duty & Land Tax
- From 23 September 2023, the threshold above which SDLT must be paid on the purchase of residential properties in England and Northern Ireland will increase from £125k to £250k.
- From 23 September 2023, first time buyers reliefs will change – (1) by increasing the level first time buyers start paying SDLT from £300k to £425k and (2) allowing first time buyers to access the relief when they buy a property costing less than £625k (rather than the current £500k).
- It’s important to note this will not apply in Scotland
IR35/’Off payroll working’
- The 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023. From this date, workers across the UK providing their services via an intermediary, such as a personal service company, will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.
Other announcements
- Increases to ‘generosity and availability’ of the Seed Enterprise Investment Scheme (‘SEIS’) and Company Share Option Scheme (‘CSOP’) will be enacted.
- SEIS – from April 2023 companies will be able to raise up to £250k of SEIS investment. Annual investor limit will be doubled to £200k
- CSOP – from April 2023 qualifying companies will be able to issue to up £60k of CSOP options to employees (double current £30k limit)
- Enterprise Investment Scheme (‘EIS’) and Venture Capital Trust (‘VCT’) will be extended beyond 2025
- No measures announced on R&D – other than “the government will continue the review of R&D tax relief, with any further reforms announced as usual at a fiscal event.”
- VAT free shopping for overseas visitors – a modern, digital system will be introduced to replace old paper-based claims.
- The Office of Tax Simplification (OTS) will be abolished “instead of having a separate arms-length body oversee simplification, the government will embed tax simplification into the institutions of government. It will therefore abolish the OTS and set a mandate to the Treasury and HMRC to focus on simplifying the tax code.”
Investment zones
- Investment zones will be established across England (and the government will work with the devolved administrations across the UK) to ‘drive growth & unlock housing’. Areas with investment zones will benefit from:
- Accelerated development – streamlining planning applications
- Time limited tax incentives – relating to business rates, enhanced capital allowances, enhanced structures and buildings allowances, employer NIC relief, SDLT relief
- Please refer to the detailed information contained in the Growth Plan for full details regarding investment zones
If you would like to read the detailed Budget documents, they are available here
https://www.gov.uk/government/publications/the-growth-plan-2022-documents, along with other overviews and factsheets here https://www.gov.uk/government/news/chancellor-announces-new-growth-plan-with-biggest-package-of-tax-cuts-in-generations
We hope that this provides you with a clear breakdown of today’s announcements, however if you have any questions about the implications of these measure on your business, please do not hesitate to get in touch.