Chancellor Kwasi Kwarteng has outlined a ‘Mini Budget’ with a stream of policy announcements. Here is our summary.
National Insurance
The government will scrap the 1.25% increase (to Class 1) in National Insurance contributions announced in September 2021.
Not proceeding with the Levy aims to reduce tax for 920,000 businesses by nearly £10,000 on average next year.
Predicted savings for SMEs will be around £4,200 on average for small businesses and £21,700 for medium-sized firms from 2023/24.
In addition, it will help almost 28 million people across the UK save £330 in 2023/24, with an additional saving of around £135 on average this year.
More detail for the self-employed
The above changes will result in Class 4 NICs again being averaged across 2022/23, so the rates will be 9.73% and 2.73%.
Income Tax
The government had previously announced that there would be a cut in the basic income tax rate, from 20% to 19%, from April 2024.
It will now take effect from April 2023.
To ‘incentivise enterprise and hard work and simplify the tax system’, the government will abolish the 45% additional income tax rate from April 2023.
Consequently, there will be a single higher rate of income tax of 40%.
The Scottish government has not confirmed their plans for setting comparative rates (on non-savings income).
Dividends
From April 2023:
- The dividend ordinary rate of 8.75% will reduce to 7.5%
- The dividend upper rate of 33.75% will reduce to 32.5%
- The dividend additional rate will be abolished
Corporation tax due on directors’ overdrawn loan accounts will also reduce to a 32.5% charge for loans made on or after 6 April 2023.
Corporation Tax
Corporation tax will not now increase and will remain at 19% for most companies.
As part of the plan to drive economic growth and encourage development, the Chancellor confirmed that The government would establish Investment Zones across the UK.
Aberdeen and Peterhead are in the running to be the UK’s first.
These zones will benefit from lower taxes and liberalised planning frameworks to encourage business investment.
Capital Allowances
The Annual Investment Allowance (AIA) gives a 100% write-off on certain types of plant and machinery, including cars with zero emissions, up to certain financial limits per 12-month period.
The government has announced that the temporary £1 million level of the AIA will become permanent. The proposed reduction will not occur.
Up to 31 March 2023, companies investing in new plant and machinery that qualifies can benefit from capital allowances, generally referred to as ‘super-deductions’.
No comment was made, suggesting its withdrawal will occur on 31 March 2023.
Stamp Duty
There will be several changes to the Stamp Duty Land Tax (SDLT) regime.
Generally, the changes increase the amount a purchaser can pay for a residential property before they become liable for SDLT.
These changes do not apply in Scotland. We operate our property tax regime: Land and Buildings Transaction Tax.
IR35
Over the last 20 years, there have been numerous changes to the tax system to try and address ‘disguised employment’ and eliminate the avoidance of additional tax and NICs charges, the latest being from April 2021.
The government has stated that it will repeal those latest changes to off-payroll working rules from 6 April 2023.
From this date, workers providing their services via an intermediary will again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.
Energy Bills for Business
The Energy Bill Relief Scheme cuts energy prices for non-domestic energy customers.
The scheme will apply to fixed contracts agreed on or after 1 April 2022 in addition to deemed, variable and flexible tariffs and contracts.
The scheme will apply to energy usage from 1 October 2022 to 31 March 2023, running for an initial six-month period.
Savings will appear in businesses’ October bills and will be automatic.