The Chancellor, Kwasi Kwarteng has presented his Mini budget to parliament today which is designed to stimulate growth, reduce the level of inflation currently being faced by the UK and assist with the cost-of-living crisis. Included within this is a significant number of tax cuts and additional support for a lot of people.
The chancellor stated that we were on course for our highest level of tax burdens since the 1940s. His approach is to reduce taxation to stimulate growth in this country. In turn he has stated this will increase supply and will then reduce inflation and ease the cost-of-living crisis. He also stated he wants to remove the burden for entrepreneurs to do business in this country.
We have summarised below the key changes which are likely to have the most impact on our clients.
We have listed this in what we believe is going to have the most impact to the least, however this will of course be different from person to person.
- The basic rate of income tax is being reduced to 19% from 20% from April 2023.
- The additional rate of income tax (for those earning in excess of £150,000 per annum), currently at 45% is being abolished from April 2023. All income above the basic rate band of £50,270 will then be taxed at the higher rate, currently 40%.
- The proposed increase of corporation tax from 19% to 25% from April 2023 has now been abolished and corporation tax will remain at 19%.
- SDLT relief for first time buyers has been increased to £425k (previously this was £350k). This applies to properties that cost £625k or less (previously £500k or less). Where a property cost exceeds £625k then the normal SDLT rates will apply.
- The starting band for when SDLT is chargeable has been increased to £250k (previously £125k). N.B. for second or additional properties purchased, the 3% surcharge will continue to apply and has not been amended in this budget.
- The effect of this budget on property investors owning residential properties is that they will save around £2,500 on SDLT for purchases over £250,000.(Side note, SDLT in most cases applies on completion of a property and not on exchange. In a small amount of cases in it can apply at the date of exchange. However most people completing on a purchase from today will benefit this change.
- The increase to National Insurance via the Health and Social Care Levy of 1.25% which was brought in by the previous Chancellor Rishi Sunak is being abolished. Employees and employers will pay 1.25% less in National Insurance from 6 November. Dividend tax will also reduce by 1.25% from April 2023.
- Energy costs will be capped for consumers at £2,500 per year for a household with average use. This is estimated to save an average household around £1,000 per year.
- Energy costs for businesses will also be capped for six months under a new Energy Bill Relief Scheme. This will reduce wholesale gas and electricity prices and will help businesses. The chancellor stated that this will provide a price guarantee equivalent to consumers.
- There is a bill being created to reduce current planning restrictions and make the process simpler to encourage further investment. This is likely to benefit property investors.
- There are around 50 new investment zones which will be created across the country. The West Midlands has been confirmed to be receiving a new investment zone. Within these investment zones, the following will apply to attract business into the area; – Liberalised planning rules for agreed sites, extra land being released from government which will accelerate property development.- Accelerated capital allowances therefore encouraging additional investment in the area- No stamp duty on approved sites
– No business rates on new business premises
– No employer’s national insurance for salaries up to £50k for new employees
- IR35 is being simplified and the 2017 and 2021 reforms will be repealed. This will reduce the burden on personal service companies providing their services through a limited company.
- There will be VAT-free shopping for overseas visitors designed to stimulate the high street. A new digital system is being created to facilitate this.
- The Annual Investment Allowance (AIA), which provides tax relief on capital investment, was due to reduce to £200k from its current level of £1m in April 2023. This limit will now remain at £1m permanently.
- The Enterprise Investment Scheme, Venture Capital Trusts, Seed Enterprise Investment Scheme and Share Option Plans, which all provides generous tax breaks for small businesses which are raising capital, are all being extended and increased.
- Alcohol duties are being frozen at their current level and will not increase with inflation as planned.
- Benefits will be cut unless more steps are being taken to get into work. There will be increased support for people aged over 55 who are unemployed. This is designed to get more people into work.
- The cap on bankers’ bonuses is being removed. The chancellor has stated this will benefit banks in this country which will in turn support new business and investment.
In other news, the Bank of England has announced an increase to the base rate of interest of 0.5%. The current base rate of interest is now 2.25% which is at the highest level since 2008.
If you would like to discuss this further and look into how this will impact you specifically – please do get in contact with your client manager who will be happy to discuss this with you.