Although billed in advance as no more than a “fiscal event”, Kwasi Kwarteng’s mini-Budget, delivered before the House of Commons at an unusually early hour of the morning on Friday 23 September 2022, could be described more aptly as the Chancellor “maxing out”, such has been the dramatic turnaround from the policies of his predecessor Rishi Sunak.
While the economic situation has undoubtedly deteriorated since Sunak’s Spring Statement of only six months ago – with the developing energy crisis and rising inflation – and the reversal of the increases in National Insurance Contributions and Corporation Tax had been widely trailed, the abolition of the additional rate and the reduction in the basic rate of Income Tax, both to take effect from next April, were certainly unexpected.
Indeed, the scope of the new Chancellor’s tax cutting measures was such as to lead the director of the Institute for Fiscal Studies to observe that there had not been a Budget on this scale for 50 years. Back then, in 1972, the Chancellor was Anthony Barber and Ted Heath was Prime Minister. Those old enough to remember that time will recall that this did not end well for the Conservatives and that they were ousted within two years.
Prime Minister Liz Truss and her friend at No 11, having risen to their positions on the votes of party members during the summer, must be hoping that they will not face a similar fate when they present themselves to a wider electorate in 2024.
The main tax changes are listed below:
- April 2022 increase in NIC to be reversed from 6 November 2022 and Health & Social Care Levy scrapped.
- The planned April 2023 increase in Corporation Tax rates to 25% is cancelled and the existing 19% rate will remain.
- Limit on qualifying expenditure for Annual Investment Allowance to remain at £1m from April 2023 (previously due to be reduced to £200k).
- Income tax basic rate to be cut from 20% to 19% from April 2023.
- 45% Additional rate of income tax to be abolished from April 2023, so that highest rate of income tax will then be 40%.
- Additional rate of income tax for dividends will be abolished from April 2023, so that highest rate will then be 32.5%.
- Recent IR35 legislation (off payroll labour) to be repealed from April 2023.
- 38 new Investment Zones to be introduced with wide ranging tax reliefs and less stringent planning conditions.
- Removal of limit on bankers’ bonuses.
- Seed Enterprise Investment Scheme and Company Share Option Plan limits to be increased.
- Enterprise Investment Scheme and Venture Capital Trust reliefs to be extended beyond 2025.
- Stamp Duty Land Tax reductions with immediate effect, particularly for first time buyers.
- Introduction of VAT-free shopping for visitors from overseas.
If you have any questions regarding the information covered in this summary, or would like advice on a particular area, please get in touch with either your usual contact or any of the UNW Tax partners. Contact details can be found on the final page of this summary PDF.