Autumn “Mini Budget” 2022

As part of the new Prime Ministers plans to address the cost of living crisis and in an attempt to stimulate economic growth, the Government led by Liz Truss has unveiled a number of measures in today’s Autumn (not so mini!) "Mini Budget" 2022.

Interest rates rose to 2.25% yesterday, the highest level in 14 years amid concerns from the Bank of England that the UK may already be in recession, as record-breaking energy price increases drive inflation rates to 40 year highs of 9.9% in August.

In his first fiscal statement today, Chancellor Kwasi Kwarteng made a series of significant announcements to the House of Commons in an attempt to thwart a depressing economic outlook. The “Growth Plan 2022” makes growth the Government’s “central economic mission” and sets an ambitious growth target of 2.5%.

The Treasury has yet to publish the economic forecast that normally accompanies the budget amid concerns it would delay today’s announcements, however the Institute of Fiscal studies predicts that the proposed tax cuts and energy saving measures combined with slow or no growth will result in an estimated annual borrowing of £100 billion. Scepticism remains as to whether today’s tax cuts are conducive to long-term economic health; the Chancellor’s plan is not without risk.

Nonetheless today’s announcements will reduce the burden for many businesses and individuals and here’s how:

Tax - Individuals

National Insurance Contributions

The unpopular hike in National Insurance contributions 1.25% introduced in April 2022 will be reversed from 6 November 2022. This will reduce NIC costs on earnings after this date. Crucially, the planned new 1.25% Health and Social Care Levy due to come into effect from April 2023 will also be scrapped. There will be an equivalent reduction in the rates of tax paid on dividends.

Personal Tax

From April 2023, the additional rate of income tax of 45% on earnings above £150,000 is being abolished and again with an equivalent abolition of the highest rate of tax on dividends. The basic rate tax will also fall from this date by 1% to 19%, one year earlier than planned. Additional rate taxpayers will also benefit from the £500 Personal Savings Allowance from April 2023.

Stamp Duty

Changes to Stamp Duty thresholds, effective from today, were also announced. Currently no stamp duty is due on purchases up to £125,000 and this will double to £250,000. First time buyer thresholds will increase from £300,000 to £425,000 and the value on which first time buyers can claim relief, will increase from £500,000 to £625,000.

Bankers Bonus Cap

The cap on bankers’ bonuses has been removed in a bid for the UK to be an attractive place for global financial services.

VAT-free shopping for Tourists

Kwarteng also announced that overseas visitors would now benefit from VAT free shopping and that a new modern digital scheme will be introduced.

Tax - Business

Corporation Tax

The proposed corporate tax rate increase from 19% to 25% in what was one of the largest increases in the last century, due to come in April 2023 has also been scrapped and the banking surcharge will now remain in place.

Investment Allowances and Relief

The Annual Investment Allowance was due to fall to £200,000 from April 2023 however, today the Chancellor announced that it will remain at £1million and become permanent. The Chancellor also pledged to extend the Enterprise Investment Scheme and Venture Capital Trust reliefs beyond 2025. The amount companies will be able to raise under the Seed Enterprise Investment Scheme will increase by two-thirds to £250,000.

Employee Share Ownership

The Chancellor also suggested that current limits on employee share option plans will increase. Currently awards of share options under HMRC’s approved Company Share Option Plans are limited to £30,000 but under new rules, this will increase to £60,000. Restrictions on the class of shares are also being lifted. This should encourage more employee share ownership in the UK.

IR35

The contentious 2017 and 2022 reforms to IR35 are to be repealed and from 6 April 2023, workers engaged via intermediaries will once again become responsible for assessing their employment status.

New Investment Zones

New Investment Zones will be established to encourage investment in specific areas. These zones will attract a raft of tax incentives including:

Enhanced allowances of 100% for expenditure on plant and machinery;
Enhanced Structures and Buildings Allowance relieving 100% of investment over five years;
Abolishing stamp duty due on land and buildings bought for new residential and commercial properties;
Relief from business rates for new business; and
No Employer NIC on the first £50k of earnings for employees engaged in new businesses.

Northern Ireland – Energy Support

Support for individuals and businesses in NI was announced earlier this week with a cap being placed on the unit price of electricity. Although details have yet to be confirmed, it is understood that Energy Suppliers will reduce bills by up to 17p/KWh for electricity and 4.2p/kWh for gas saving typical households up to £1,000 per year.

However, this measure will not take effect until November meaning most customers will have to bear the steep price increases for the month of October.

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