Last Friday 23rd September, the Chancellor of the Exchequer, the Rt Hon Kwasi Kwarteng MP, published the government’s Growth Plan in the form of a mini-budget which aimed to deliver a package of measures aimed at delivering a pro-growth, simplified tax system that supports business investment across the United Kingdom and allows people to keep more of their own money.
This came a day after the government announced that the Health and Social Care Levy (HSCL) of 1.25 percent due to be introduced from April 2023 will now not go ahead – and that the 1.25 percentage point uplift in National Insurance contributions (NICs) rates that was introduced in April 2022 will end on 6 November 2022. HMRC has emailed software providers, employers and agents to make them aware of these changes.
Measures announced in the mini-budget include:
· The basic rate of income tax has been cut from 20% to 19% from April 2023.
· The tax rate for higher earners of 45% has been abolished and replaced with a 40% top tax rate.
· The cancellation of the planned increase to the Corporation Tax (CT) main rate from 19% to 25% – with the main rate remaining at 19% from 1 April 2023.
Work and Investment
· The repeal of reforms to the Off-Payroll Working (OPW) rules introduced in the public sector in 2017 and extended to medium and large-sized organisations in the private and voluntary sectors in 2021 – with workers providing their services via an intermediary once again responsible for determining their employment status and paying the correct amount of tax and National Insurance contributions from 6 April 2023.
· Confirmation that the Annual Investment Allowance (AIA) will be set at £1 million permanently, originally raised from £200,000 as a temporary measure in January 2019 (and due to end in March 2023).
· An expansion of the Seed Enterprise Investment Scheme (SEIS) to help more UK start-ups raise higher levels of finance – doubling the annual investor limit to £200,000, increasing the gross asset limit to £350,000 and making it easier for investors to claim tax reliefs, due to come into force from 6 April 2023.
· Changes to the Company Share Option plan (CSOP) scheme – increasing the employee share option limit from £30,000 to £60,000 and removing a condition which limits the types of shares eligible for inclusion within the scheme, both due to take effect from 6 April 2023.
· The cancellation of the planned increase in the rate of Diverted Profits Tax from 25% to 31% and the planned reduction in the Corporate Tax surcharge rate for banking companies, both of which had been due to take effect from 1 April 2023.
· Repeal of IR35 - Currently this means that where the tax law required the employer and not the contractor to decide if the working relationship was going to be as a self-employed contractor or an employee. From April 2023, this reform is to achieve a simpler system to remove unnecessary costs for businesses. This will mean workers will once again be responsible for determining their employment status and it will be their responsibility for paying the appropriate amount of tax and NI contributions.
Infrastructure and investment zones
· The introduction of new investment zones around the UK where enhanced tax reliefs will be offered for Stamp Duty Land Tax (SDLT), Enhanced Capital Allowances, Structures and Buildings Allowance and Employer National Insurance contributions
· A freeze on Alcohol Duty rates from 1 February 2023, and further details of the government’s reforms to alcohol taxation
· The introduction of a new digital VAT free shopping scheme for non-UK visitors, as soon as possible
· changes to Stamp Duty Land Tax (SDLT), including doubling the nil-rate threshold from £125,000 to £250,000, increasing the level at which first-time buyers start paying SDLT from £300,000 to £425,000 and allowing first-time buyers to access this relief on property purchases up to £625,000 .
· Energy Prices - The energy price guarantee means that, and average household will pay no more than £2,500 per year for a period of two years from October 2022.
· The government has also announced plans to close the Office of Tax Simplification (OTS), embedding tax simplification into the institutions of government and setting a mandate to the Treasury and HMRC to focus on simplifying the tax code.
If you require assistance in relation to the above and/or would like to discuss anything further, please do not hesitate to contact email@example.com or your usual A.C.T. contact.