Mini Budget 23 September 2022

Mini Budget 2022 at a glance

The chancellor, Kwasi Kwarteng, on 23 September 2022 has presented his mini-budget and “The Growth Plan 2022” announcing major reversals to a large chunk of his predecessor's tax policies, which, together with a package of tax cuts, will greatly benefit owner-managed businesses.

National Insurance Contributions (NICs)

From 6 November 2022 (or as soon as payroll systems can be changed, if later). Reverse the 1.25% increase in NICs rates and cancel the Health and Social Care Levy. Employee rates will return to 12% and 2%, with an employer's rate of 13.8%. The Self Employed rate will return to 9% and 2%.

Dividend Tax

From 6 April 2023 the 1.25% increase in the dividend rates is to be reversed. This change also affects the tax rate of tax paid by companies on outstanding loans to participators, which will reduce too.

Income Tax

From 6 April 2023 the basic rate of tax is reduced from 20% to 19%. The additional rate of income tax of 45% is removed, meaning that the top rate of tax is 40%. The additional rate of tax on dividends will also be removed.

Stamp Duty Land Tax (SDLT)

From midnight on 23 September 2023 the Residential nil-rate threshold increases from £125,000 to £250,000. This affects SDLT calculations for all types of residential property transactions, except for First Time Buyers' Relief. The Nil-rate threshold for First Time Buyers’ Relief increases from £300,000 to £425,000. The maximum amount that an individual is able to pay for a home while remaining eligible for First Time Buyers’ Relief, increases from £500,000 to £625,000. These measures apply to the purchase of Residential property in England and Northern Ireland only. This measure does not apply to Scotland or Wales who operate their own land transactions taxes.

VAT

A new digital, VAT-free shopping scheme will be created to attract non-resident visitors. Non-UK visitors to Great Britain will be able obtain a VAT refund on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage. (A consultation will follow).

Corporation Tax

The planned increase in Corporation Tax from 19% to 25% in April 2023 is reversed so the19% rate will continue to apply.

Diverted Profits

Tax was also due to increase from 25% to 31% in April 2023. This measure is also reversed, but diverted profit tax will remain at 6% above the main rate of Corporation Tax at 25%.

Annual Investment Allowance (Capital Allowances)

The planned reduction in the AIA limit to £200,000 from 1 April 2023 will be scrapped. The AIA limit to be permanently set at £1 million. This announcement comes alongside plans to develop Investment Zones in 38 local authorities in England which will benefit from additional enhanced capital allowances

IR35 and Off-payroll working

From 6 April 2023 the 2017 and 2021 reforms to off-payroll working in the public and private sectors are reversed. Workers providing their services via an intermediary will once again be responsible for determining their own employment status and paying the appropriate amount of tax and National Insurance contributions under the IR35 rules.

Company Share Option Plan (CSOP)

From April 2023 qualifying companies will be able to issue up to £60,000 of CSOP options to employees, double the current £30,000 limit.

Seed Enterprise Investment Scheme (SEIS)

From April 2023 companies will be able to raise up to £250,000 of SEIS investment. The current limit is £150,000. The gross asset limit will be increased from £200,000 to £350,000, and the trading time limit from two to three years. The individual annual investor limit of £100,000 will be doubled to £200,000.

New Investment Zones across the UK

Zones are to be set up in 38 local authority areas in England plus areas to be designated in Scotland, Wales and Northern Ireland. They will have designated development sites with relaxed planning controls to release more land for both housing and commercial development. Businesses setting up in these zones will benefit from: tax breaks including: Stamp Duty Land Tax (SDLT), 100% business rates relief, enhanced capital allowances for plant and machinery and enhanced Structures and Buildings Allowance rate and a zero rate of Employers NICs for new employees.

Office of Tax Simplification (OTS)

The Treasury's independent tax simplification body is to go. The government has now decided that the best way to simplify the tax system is to embed the concept into government rather than having a separate body to oversee the process.

Alcohol Duty

The government will freeze all duties for one year from 1 February 2023. Following consultation, there will be a reform package to Alcohol Duty.

Energy

As previously announced, the government will provide two support packages for domestic and business users of electricity and gas:

Domestic users - cost of living support package via an Energy Price Guarantee which supports households through a cap on the unit rate of electricity and gas. The newly announced support package will run alongside the existing measures already set out. £400 per household paid in six instalments from this October under the Energy Bills Support Scheme. £1,200 of extra support for the most vulnerable.

Non-domestic and business users -the Energy Bills Support Scheme will provide support for business for a six month period. The scheme will be reviewed after three months. There is the possibility of extension of the scheme for certain business after six months.

Deregulation

Banker's bonuses - the EU's cap on bankers' bonuses is to be lifted in the UK. The rationale is that it was ineffective as employees received higher base salaries in compensation.

Deregulation of pensions

Draft regulations to reform the pensions regulatory charge cap, will be brought forward, according the Growth Plan. This will give defined contribution pension schemes flexibility to invest in the UK’s most innovative businesses and productive assets creating opportunities to deliver higher returns for savers.

Funding for government

According to the chancellor's Growth Plan:-

Inflation - the Monetary Policy Committee of the Bank of England is responsible for controlling inflation and has taken action by raising interest rates to 2.25%. It will begin active sales of UK government bonds to reduce the stock of purchased bonds by £80 billion over the next twelve months

Funding

The Debt Management Office Net Financing Requirement (NFR) in 2022-23 has been revised upwards, from £161.7 billion in April 2022 to £234.1 billion in September 2022. This will be financed by additional gilt sales of £62.4 billion and net Treasury bill sales for debt management purposes of £10.0 billion, relative to April.

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