Posted September 28, 2022
On Friday 23 September the new Chancellor presented his mini budget to the House of Commons. Below is an outline of the main points that will affect clients. You should note that there is no Finance Bill accompanying this mini budget, although the legislation for the reduction in the national insurance was introduced into the House of Commons on 22 September. We envisage that these announcements will be included in the Finance Bill accompanying the next Budget.
The mini budget detailed numerous tax cuts with the aim of expanded the supply side of the economy, with target growth of 2.5%.
Bank of England Base Rate Increase
On 22 September, the Bank of England raised the base rate by 0.5% to 2.25%, this will affect the rate of interest paid by HMRC on tax under and overpayments, student loan interest (plan 1) and any other bank or other borrowing set with reference to the base rate.
In an effort to support both businesses and households, the government has capped the energy prices of gas and electricity charged by energy suppliers. Businesses will have guaranteed rates between 1 October 2022 and 31 March 2023, these will apply to fixed contracts agreed on or after 1 April 2022, as well variable and flexible tariffs and contracts. The rates are expected to be £211 per MWh for electricity and £75 per MWh for gas.
The Chancellor announced new investment zones, 38 local authorities are in discussion with the Treasury. Businesses within the investment zone will have preferential capital allowance treatment, no stamp duty to pay on land, buildings or leases, no business rates payable, and no employer NIC liability (capped at £50k PA).
The rate of corporation tax was due to increase to 25% from 1 April 2023 for businesses with profits over £250,000 with a marginal rate applying to businesses with a profit between £50,000 and £250,000. This increase has now been cancelled and all profits subject to corporation tax will continued to be taxed at 19%.
Capital Allowances – Annual Investment Allowance
Capital allowances are a tax allowance for purchasing certain capital items. Businesses can deduct up to 100% of the cost of specific eligible item using annual investment allowance, the maximum investment was due to reduce back to £200,000 from 1 April 2023, the Chancellor has announced that the maximum amount available will remain at £1,000,000 indefinitely.
Capital Allowance – Super Deduction
The super deduction was brought in when the previous Chancellor announced the rate of corporation tax would increase to 25% to ensure that companies did not defer investment in capital equipment to obtain tax relief at a high rate. The super deduction is available at 130% of the cost of the equipment – this is due to end on 31 March 2023. If you are intending to purchase equipment, it may be worth considering whether this could be brought forward to before 31 March 2023 to benefit from the super deduction. Please call your Client Manager to discuss asset purchases as not all equipment is covered by the super deduction.
The increases to employee and employer NIC will be cancelled from 6 November the rate of Class 1, Class 1A, Class 1B and Class 4 NIC will reduce by 1.25%. If we process your payroll, we will ensure that this is processed automatically. The threshold at which employees, employers and the self-employed pay NI remain unchanged.
Reduction in Dividend Tax
The rate of dividend tax will be reduced by 1.25% from 6 April 2023 on both the basic rate and higher rate. The additional rate of dividend tax (currently 39.35%) will be abolished, leaving the highest rate of dividend tax at 32.5% from 6 April 2023.
Reduction in Basic Rate Income Tax
The rate of tax on savings and non-savings income will reduce from 20% to 19% from 6 April 2023.
Abolishment of Additional Rate Income Tax
The additional rate of income tax (currently 45%) will be abolished from 6 April 2023.
The IR35 reforms will be repealed, from April 2023 the end client rather than the engaging party will be responsible for determining their employment status and ensuring that they are paying the appropriate amount of NIC and tax.
There will be an increase in limits on the Seed Enterprise Investment Scheme and Company Share Option Schemes.
The intended rise in the duty on beer, wine and spirits will be cancelled.
Overseas visitors to the UK will no longer pay VAT.
There is an increase in the 0% rate of stamp duty, this has risen to the first £250,000 of a property.
There were no changes announced to capital gains tax, business rates or inheritance tax.
If there are any areas of the mini budget you would like to discuss with us, please do not hesitate to contact one of the team for advice.