Walker Accountancy

Kwasi Kwarteng presented “The Growth Plan 2022” mini-budget on Friday 23 September 2022.

It was not a full budget, but contained key announcements relevant to individuals and small businesses which are summarised below.

National Insurance

As announced yesterday, the increase in employee and employer national insurance for the health and social care levy introduced in April 2022 will be cancelled with effect from 6 November 2022.

This means that for non-director employees and their employers, national insurance will revert to its previous rates of 12% (2% above the upper threshold of £50,270) for employees and 13.8% for employers from payrolls run after 6 November 2022.

The cut will also cover class 1A (employer benefits), directors’ and class 4 (self employed) national insurance.  However, since the reduction takes effect from 6 November and these taxes are calculated on an annual basis, there will be hybrid rates for the 2022-23 tax year.

Class 1A national insurance (normally aligned with employer national insurance) will be 14.53%.

For Directors, employee national insurance will be will be 12.73% (2.73% above the upper threshold of £50,270) and employer national insurance will be 14.53%.

Class 4 will be 9.73% for the main rate and 2.73% above the upper threshold.

The separate Health and Social Care levy due to come in from 6 April 2023 (at which point, national insurance was due to revert to its previous levels) will also be cancelled.

Income tax

Rishi Sunak had announced in the Spring Statement that the basic rate of tax would be reduced from 20% to 19% from April 2024.  Kwasi Kwarteng brought this forward, so that income tax will reduce to 19% from April 2023.

He also announced that the additional rate of tax of 45% will be abolished from April 2023, so that there will be a single higher rate of income tax for all earners of 40%.

The Income Tax rate cuts announced today do not apply to Scottish taxpayers since the Scottish Government set their own income tax rates and bands.

(Note: That does not mean that the highest marginal rate of income tax is 40% since the personal allowance is withdrawn at a rate of £1 for every £2 of income over £100,000, which gives an effective rate of income tax of 60% for earnings between £100,000 and 125,140.)

Dividend tax

The 1.25% increase in dividend rates implemented alongside the increase in national insurance rates will remain for the current tax year, but will be removed from April 2023.

The additional rate of dividend tax (currently 39.35%) will also be abolished from April 2023 in line with the removal of the income  tax additional rate of tax.

Business tax

Also announced yesterday, the increase in corporation tax rates due to take place in April 2023 will be cancelled, leaving corporation tax at 19%.

The Annual Investment Allowance (the maximum spend on capital items that can be written off in full in the year of purchase), which was due to fall from £1m to £200,000, will remain at £1m permanently.

There were also extensions to share option schemes to boost investment and employee share ownership.

The Chancellor also announced that the changes to IR35 (tax on service company workers) introduced in 2017 and 2021, pushing the onus on the end user to determine employment status, will be repealed from April 2023.

Charities

Charities can reclaim basic rate tax (currently at 20%) on donations made to them under Gift Aid.

The reduction in the basic rate of tax will reduce the tax that charities can claim under Gift Aid, however, there will be a four-year transition period for Gift Aid relief to maintain the Income Tax basic rate relief at 20% until April 2027.

Stamp Duty

The Chancellor announced a permanent increase in the nil rate band for stamp duty from £125,000 to £250,000.

The nil rate band for first time buyers will increase from £300,000 to £425,000 on the purchase of houses up to a value of £625,000 (increased from £500,000).

These changes will take effect from today.

Investment Zones

There will be new investment zones created throughout the company with tax incentives, such as accelerated tax relief for structures and buildings, 100% allowances on plant and machinery, nil rates of stamp duty and business rates and national insurance reliefs on new employee earnings up to £50,270 per year.

The government is in consultation with 38 local authorities (including Derbyshire, Nottinghamshire and Leicestershire) on the location of the zones.

Energy

The Chancellor confirmed the energy caps and financial help for domestic properties.

He also announced that businesses would be afforded similar protection.

The energy relief scheme is a temporary six-month scheme which will be reviewed after 3 months to inform decisions on future support.

Other duties

Alcohol duties will be frozen for a year from 1 February 2023.

A response to the previous consultation on future changes to the alcohol duty system was published today with reforms to introduced in August 2023.