On Friday 23rd September, the new Chancellor of the Exchequer Kwasi Kwarteng announced his mini budget to the public, following Liz Truss’ appointment as Prime Minister earlier this month. Our tax experts summarise what you need to know about ‘Growth Plan 2022’.

The Chancellor began his announcement by stating that the government’s Emergency Mini Budget, titled ‘Growth Plan 2022’ was built on three priorities:

  • Reforming the supply side of economy
  • Maintaining a responsible approach to economy
  • Cutting taxes to boost growth

Our tax experts have summarised the key announcements:

Changes to income tax

The Basic Rate of income tax will be cut to 19% in April 2023, one year ahead of schedule.

It was initially announced that the Additional Rate of income tax (the highest rate at 45% for earnings over £150,000) would be abolished, however the Chancellor announced on 3rd October that the government would not proceed with its abolition plans.

Reversal of National Insurance Contributions (NIC) increase by scrapping the Health and Social Care Levy

The Chancellor confirmed that the National Insurance Contribution rate increase to 1.25% for employers, employees and the self-employed will be reversed. This change will take effect from 6th November 2022.

Planned corporation tax increase scheduled for April cancelled

Corporation tax will remain at 19% rather than rising to 25% in April 2023, as previously announced in the Spring Budget.

Investment Zones to be established

The government will introduce new ‘Investment Zones’. Businesses operating within these areas will benefit from increased rates of relief for Capital Investment, Stamp Duty exemptions and National Insurance.

Businesses outside of the Investment Zones will have continue to have an Annual Investment Allowance of £1m on qualifying expenditure on plant and machinery per annum, instead of this being reduced to £200,000 as previously planned.

Seed Enterprise Investment Scheme enhanced

Start-ups will be able to raise up to £250,000 under the Seed Enterprise Investment Scheme, while previously the limit was £100,000. Company age and gross asset limits will also increase, as will personal limits on investments within the scheme, which will rise to £200,000 per year.

These changes will take effect from April 2023.

IR35 rule changes

Workers that provide services through intermediary companies will be responsible for determining their employment status, shifting the responsibility and compliance obligations away from the company that contracts their services.

Generous changes to Company Share Option Plan

Changes to the Compare Share Option Plan will double the value of share options that can be granted to £60,000. Certain restrictions surrounding the plan rules will also be removed.

VAT-free shopping for tourists

Overseas visitors will be able to shop VAT-free, as part of a plan to modernise the UK.

Stamp Duty tax cut

Stamp Duty tax will be cut, raising the threshold on residential property value to £250,000. Buyers acquiring residential properties worth less than £250,000 will not have to pay stamp duty (subject to the higher rates for additional properties).

Additionally, the stamp duty tax threshold for first time buyers will be raised from £300,000 to £425,000. First time buyers will be able to claim this relief on properties worth up to £625,000, an increase on the previous cap of £500,000.

Reduced energy costs for businesses

The Chancellor announced an energy bill relief scheme, which will reduce wholesale costs of energy for all UK businesses, charities and the public sector.

An energy markets financing scheme will also be delivered with the Bank of England to provide energy traders with access to emergency liquidity.

Cap on bankers’ bonuses removed

The current cap on bankers’ bonuses will be removed. Initially introduced across the EU in 2014 following the global financial crisis, the cap prevented bankers from receiving bonuses that were higher than twice their annual salary unless shareholders agreed.

Trade unions required to put pay offers to vote

In response to the disruption caused by recent strike action, the government will introduce legislation that requires trade unions to put all pay offers from employers to a vote from their members. The objective of this new legislation is to ensure that strikes are only called when negotiations with employers have fully disintegrated.

Duty rates increase on beer, cider, wine and spirits abolished

Planned duty rate increases for beer, cider, wine and spirits will be scrapped. Draught relief will also be extended to include kegs of 20 litres and above in order to ‘help small breweries’.

We will be sharing a comprehensive summary of the Mini Budget over the coming days. If you could like further advice on the budget, get in touch with us to speak to one of our tax specialists.