After market turmoil and uncertainty, the new Chancellor resigned on Friday, 14th October. The new chancellor, Jeremy Hunt was appointed as his replacement. Many of the tax cuts originally announced in the mini budget have been reversed and we will outline these below.
National Insurance
National Insurance rates for employees and employers increased by 1.25% in July 2022, as announced by the previous Chancellor, Rishi Sunak. This increase will now be reversed from November 2022. There are also no longer any plans for the new Health and Social Care levy. This cut is expected to save employees on average salaries around £330 per tax year, whilst benefitting top earners by around £1,800 per tax year. Businesses will also save money on employers National Insurance, and this is expected to be almost £10,000 per tax year for 920,000 businesses operating in the UK. This tax cut is still going ahead under the new chancellor.
Income Tax
Both the reduction in basic rate income tax from 20% to 19%, due to come in in April 2023 and additional rate tax from 45% and 40% have been reversed. All income tax rates will remain the same indefinitely.
Dividend Tax
Cuts to dividend tax are also no longer going ahead. It was planned to revert dividend tax to their prior rates after they were increased on 06 April 2023. The £2,000 tax free allowance remains.
This now means that it will not be beneficial from a tax rate difference perspective to defer dividends until 06 April 2023.
| Dividend rates | 2022/23 | 2023/24 |
| Basic rate | 8.75% | 8.75% |
| Higher rate | 33.75% | 33.75% |
| Additional rate | 39.35% | 39.35% |
Corporation Tax
The increase in Corporation Tax was withdrawn in the mini budget, however this has now been re-instated. The Corporation Tax main rate for non-ring fenced profits will be increased to 25% applying to profits over £250,000. A small profits rate (SPR) will also be introduced for companies with profits of £50,000 or less so that they will continue to pay Corporation Tax at 19%. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.
Annual Investment Allowance (AIA)
AIA on qualifying plant and machinery will now permanently be set at £1,000,000. It was due to revert to £200,000 from 01 April 2023.
This will still go ahead to promote business investment.
Stamp Duty Land Tax (SDLT)
The mini budget announced increases to the SDLT thresholds. Previously buyers only paid SDLT on the portion of the property’s value over £125,000, this has now been increased to £250,000.
Whilst for first time buyers the rates on which SDLT is paid has also been increased to £425,000 from £300,000.
Changes to stamp duty thresholds have been unchanged by the new Chancellor.
Seed Enterprise Investment Schemes (SEIS)
The SEIS scheme offers tax relief to qualifying investors and helps the company being invested in to grow.
From April 2023, investors will be able to invest up to £200,000 into a qualifying company, currently the maximum investment is £100,000.
Companies are currently allowed to receive a maximum of £150,000 through SEIS schemes, but this will now be increased to £250,000 from April 2023. The gross asset limit has also been increased from April 2023 to £350,000, allowing more companies to have an opportunity to take part in the scheme.
These changes are still planned to go ahead.
IR35
The mini budget announced that the onus or whether a limited company is deemed a personal service company would be passed to the personal service company, which is how it was prior until it changed in 2021. This change has now been reversed and the onus will continue to be on the end user.
VAT (Value Added Tax)
The mini budget announced that for overseas visitors, there would be a digital VAT-free shopping scheme introduced. This change has now been reversed.
Energy price guarantee
Government support over energy bills was expected to stay in place for two years. However, this has now been changed and the support will be for 6 months, ending in April 2023. The Government are reviewing other ways in which they can help by better targeting support. It is implied that support for businesses will only be provided to those most affected.
Tax Planning by Leading Tax Advisors JWR Accountants
There have been a lot of changes as of late and it is as important as ever to ensure you and your business are structured correctly and taking advantage of all tax saving opportunities and reliefs. In this respect, we will shortly be announcing further details of our tax diagnostic service which will provide you with further support in these areas.
Please do not hesitate to contact us should you require any additional information.
