Mini budget 

UPDATE

After the Chancellor, Kwasi Kwarteng, delivered his mini budget on 23rd September it was clear there was a tremendous amount of dissatisfaction amongst the political parties.

Just 10 days after it was announced, The Prime Minister and The Chancellor have now made a U-turn on the proposed abolition of the additional rate of income tax of 45%.

Chancellor Kwasi Kwarteng told the press the proposals had become a ‘massive distraction on what was a strong package’.

The Chancellor, Kwasi Kwarteng, unveiled his growth plan on Friday 23^rd September 2022.

Here’s a roundup of what was announced.

Corporation Tax

Corporation tax was due to increase from 19% to 25% in April 2023 but this rise has been cancelled.

Many businesses are already feeling the strain due to rising inflation rates, cost of living and energy prices so this freeze is welcome and should encourage businesses to start investing again.

Income Tax

From April 2023, there will be a reduction in the basic rate of income tax from 20% to 19%, one year earlier than planned with 31 million people getting on average £170 more per year from April 2023.

The higher rate of income tax at 45% will be abolished leaving just one single higher rate of income tax at 40%. Earners taking home more than £150,000 will now pay 40% on anything above £50,271.

Dividends

From April 2023, the government has cut the dividend tax rate for high earners by 6.85% from the current 39.35% to 32.5%.

The ordinary and upper rates of dividend tax will be reduced back down to 2021/22 levels of 7.5% and 32.5% respectively.

This will benefit 2.6 million dividend taxpayers with an average saving of £345 in 2023/24 and additional rate taxpayers will further benefit from the additional rate of dividend tax being abolished.

National Insurance

From 6th November 2022, the temporary 1.25% increase in National Insurance rates will be removed and will help almost 28 million people save £330 on average in 2023/24. This is on top of the additional saving this year due to the increase in National Insurance threshold to £12,570 which came into effect in July 2022.

Annual Investment Allowance

The Annual Investment Allowance which was due to return to £200,000 in March 2023, will be set at £1 million permanently.

This is a 100% capital allowance for expenditure of qualifying plant and machinery.

This will provide a £930 million boost to businesses in 2023/24 rising to £1.3 billion in 2024/25.

Stamp Duty

The NIL rate band has increased from £125,000 to £250,000 with immediate effect.

First time buyers will now pay no stamp duty up to £425,000 and the maximum value of a property on which first-time buyers relief can be claimed has also increased from £500,000 to £625,000.

The chancellor also announced further support to homebuyers by increasing the disposal of surplus government land to build new homes.

SEIS

From April 2023, the level of tax-free investment in seed enterprise investment schemes (SEIS) will increase to £250,000 which is a two thirds increase.

The gross asset limit will be increased to £350,000 and the age limit from 2 to 3 years to enable more companies to use SEIS.

The annual investor limit will also be increased to £200,000.