Details announced in the mini budget of 23/9/2022:
What we believe to be the “headlines” of the mini budget announced today, are:
Businesses:
The planned increase in corporation tax to 25% from April 2023 has been cancelled. Corporation tax will instead remain at the flat rate of 19%. This keeps UK corporation tax rate at the lowest in the G20.
The 1.25% increase in National Insurance contributions has also been scrapped, the change coming into force on 6 November.
The Annual Investment Allowance will remain at £1 million permanently, rather than the planned return to £200,000 in March 2023. This gives 100% tax relief to businesses on their plant and machinery investments up to the higher £1 million limit.
Income tax:
The Chancellor announced a 1p cut to the basic rate of income tax one year earlier than planned. From April 2023, the basic rate of income tax will be cut to 19% (from 20%).
Alongside cutting the basic rate of income tax, the Chancellor has also abolished the additional rate of tax, taking effect from April 2023. In its place will be a single higher rate of income tax of 40%, meaning there will only be two levels of income tax. It should be noted, however, that income between £100,000 and £125,140 will still be taxed at an effective rate of 60% (i.e. 40% higher rate tax plus the abatement of the personal allowance meaning that income that would otherwise be covered by the personal allowance will instead be taxed at 20%).
Stamp duty:
To try and kick start the property market, the nil rate band will be doubled from £125,000 to £250,000, meaning that 200,000 more people every year will be able to buy a home without paying any Stamp Duty at all. The standard buyer in England will save £2,500.
The Government is going even further to support first time buyers, who will now pay no stamp duty up to £425,000 (currently £300,000), and increasing the value of the property on which first time buyers can claim relief, from £500,000 to £625,000. This tax cut took effect from midnight today (Friday 23 Sept 2022).
Other:
The Chancellor also set out plans to tackle the high cost of energy. To tackle this the government’s Energy Price Guarantee will save the typical household £1,000 a year on their energy bill with the Energy Bill Relief Scheme halving the cost of business energy bills.
Clarke Nicklin commentary:
The above changes are to be welcomed and will go some way to helping individuals and businesses with ongoing cost of living crisis.
The changes announced will in most instances mean that extraction of profits by way of dividends (rather than salary and bonus) remains the more tax efficient option but should be looked at on a case by case basis.
If anyone wants to read the full Growth Plan 2022 Factsheets, they can be found using the following link:
Please also note that the announcements today are budget proposals and are yet to be made into law. Professional advice should be sought before taking any action.
