On Sept 23rd, 2022, the Chancellor, Kwasi Kwarteng, announced a mini-budget to help businesses and individuals with the increasing costs of living. I have summarised the announcements that will help businesses below.
- Basic rate of income tax for those in England, Wales and Northern Ireland will be lowered to 19% from April 2023 – this will affect all self-employed businesses and employees who earn between £12,571 and £50,270 a year. This is the proposed tax reduction that the previous Chancellor, Rishi Sunak, promised would happen before the end of Parliament in 2024. The new Chancellor has brought this forward.
- The 45% higher rate of income tax, which is charged on incomes over £150,000 will be abolished for all those in England, Wales and Northern Ireland. It was announced on October 3rd, 2022 that this change has now been rescinded. There will continue to be a 45% higher rate of income tax.
- There will be one single higher rate of income tax of 40% from April 2023 for all those in England, Wales and Northern Ireland that earn over £50,270 a year. It was announced on October 3rd, 2022 that this change has now been rescinded. There will continue to be a 45% higher rate of income tax.
It is important to note that Scotland has different income tax bands, so the changes outlined in points 1 to 3 do not apply to them.
- The National Insurance increase of 1.25 percentage points that was implemented in April 2022, will be removed from November 6th, 2022. This was applied to Class 1 NIC paid by employers and employees and Class 4 NIC paid by the self-employed. The amount of National Insurance paid by an individual is based on what their income is. For those who earn less than £12,570, they won’t see any benefit of this as National Insurance is not paid on any amounts under £12,570. As the amount of money earned increases, the benefit of the reduction in NI will increase. This also means that the planned Health and Social Care levy will also be cancelled.
- The announced increase for Corporation Tax from 19% to 25% in April 2023 will no longer go ahead.
- The rules around IR35 will be simplified from April 2023. This will include removing the responsibility of businesses to determine a worker’s tax status. Employees will be able to determine their own tax status instead.
- The amount of money companies can invest tax-free in plant and machinery, known as the Annual Investment Allowance, will remain at £1m indefinitely to help promote business investment and productivity.
- There will be a regulation change so that pension funds can increase UK investments to help stimulate growth in the economy and help with investment in science and tech companies.
- All new and start-up companies will be able to raise up to £250,000 under a scheme giving tax relief to investors.
- Share options for employees have doubled from £30,000 to £60,000.
- In 38 local authorities within England, Investment Zones will be set up which will provide businesses with more targeted and time-limited tax cuts. More land will able to be released for housing and commercial development due to changing the planning rules, which will help to create new jobs and houses for the areas.
- The hospitality sector will benefit from the freeze on alcohol duty for another year.
- New measures to help businesses with rising energy costs were announced on Wednesday, Sept 21, 2022. This includes a cap on costs per unit. All businesses, charities and public sector organisations who are on existing fixed price contracts agreed on or after April 1st, 2022, signing new fixed price contracts, are on deemed or out of contract or variable tariffs or are on flexible purchase or similar contracts will be eligible for the scheme. It will automatically be applied to your bills from October 1st, 2022 to March 31st, 2023. You can read more about this specific measure here: https://www.gov.uk/guidance/energy-bill-relief-scheme-help-for-businesses-and-other-non-domestic-customers.
You can read more about the mini-budget here: https://www.gov.uk/government/news/chancellor-announces-new-growth-plan-with-biggest-package-of-tax-cuts-in-generations. As more information is released by the government, I will continue to provide updates across social media and through the blog.