The newly appointed Chancellor, Kwasi Kwarteng, announced a ‘mini budget’ on 23rd September 2022 under Liz Truss’ new Government. The mini budget was announced to set out the Governments key policies to help tackle the higher energy costs and inflation. Below we will be setting out details of the changes, which have been dubbed as the biggest package of tax cuts since 1972.
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.
Basic rate income tax was expected to decrease from 20% to 19% in 2024, this cut has now been brought forward to April 2023.
It was also announced that there would be a single higher rate of 40% tax rather than the current 40% and 45%. This tax cut was withdrawn on 3rd October 2022, so additional rate taxpayers will continue to pay 45% on some of their earnings.
In the previous spring statement, it was announced that dividend tax will rise by 1.25% across all tax bands, this came into effect from 06 April 2022. This decision will be reversed from 06 April 2023 and dividends will revert to being taxed at their prior rates, which can be found below. The tax-free allowance of £2,000 per tax year will remain unchanged.
Therefore, company directors who have control over when a dividend is voted may want to delay paying a dividend until 06 April 2023 for tax savings.
Corporation Tax was expected to rise from 19% to 25% in April 2023, however this has also been withdrawn and the rate of Corporation Tax will remain at 19%.
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.
Stamp Duty Land Tax (SDLT)
There have also been 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.
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.
The Government have now made a U-turn on the IR35 legislation which was introduced in 2017 and 2021. From April 2023, the end user of personal service companies will no longer be responsible for assessing whether the contractor should be taxed as an employee, this onus will now be on the personal service company providing the service. This could mean that we will see more limited companies and less employees.
VAT (Value Added Tax)
For overseas visitors, there will be a digital VAT-free shopping scheme introduced. It has not yet been announced how this will need to be recorded or reported.
In conclusion, there have been some advantageous changes announced by The Chancellor in the mini budget and the main changes for you to be aware of are outlined above. Whilst the finer details have not yet been released by The Chancellor, our experienced team at Johnston Wood Roach Limited will be able and happy to assist you with any concerns you may have with the changes.