The Chancellor Kwasi Kwarteng has used his not so mini "mini-budget" to put forward a new growth plan with a focus on driving increased business investment and expansion through a reduced tax and compliance burden. The growth plan focuses primarily on headline grabbing changes to tax rates namely income tax and corporation tax, but there are also interesting proposals in the detail such as expanding the availability of SEIS and CSOPs, the abolition of the off-payroll working rules and the creation of investment zones.
Mini Budget 2022
Announced 23 September 2022
Key measures at a glance
Corporation Tax rate and annual investment allowance
As anticipated the Chancellor has confirmed that the planned corporation tax increase to 25% from April 2023 will be cancelled. Corporation tax will remain at 19% keeping the rate in the UK the lowest in the G7.
In a measure intended to support business investment the government confirmed the Annual Investment Allowance (AIA), which enables businesses to claim a 100% deduction for capital expenditure on qualifying plant and machinery, will be set permanently at £1 million. This cancels the planned reset of the AIA to £200,000 which was due to take place from 1 April 2023. This will be welcome news for any business owners looking to invest in their business in the future.
Cuts to stamp duty land tax (SDLT), effective from 23 September, are anticipated to stimulate the residential property market as the nil rate band has been doubled from £125,000 to £250,000. First time buyers will also benefit from extensions to the nil rate band; the threshold for paying SDLT on a first home has increased from £300,000 to £425,000, and the value of properties on which first-time buyers' relief can be claimed has also risen from £500,000 to £625,000. This is a welcome announcement to many prospective buyers, and particularly first time buyers, as the new measures will enable first time buyers to access up to £11,250 in relief amidst an increasingly competitive housing market.
April's NICs increases (introduced for the purposes of the Health and Social Care Levy) will be reversed from 6 November. At that point, subject to some transitional provisions for contributions paid annually, NICs will return to their lower 2021-22 rates. The corresponding increases in dividend tax rates will also be reversed but not until April 2023 and the government has already introduced legislation to cancel the separate Health and Social Care Levy.
One of the most unexpected announcements in the mini budget was the UK Chancellor's abolition of the additional rate (45p) of income tax from April 2023, citing the want to reward work, simplify the tax system and cut the overall tax burden as its reasons for the change. The basic rate cut by 1p (from 20p to 19p) will also be brought forward to April 2023. The abolition of the 45% rate was viewed as particularly controversial in the current economic climate and on 3 October, the Chancellor announced that the abolition of the 45p rate would no longer go ahead.
IR35/Off payroll working
The Government has announced that the recent reforms to the off-payroll working rules (a part of the rules around "disguised employment" also known as IR35) will be reversed from 6 April 2023, it appears both for private and public sector businesses. As a result, contractors providing services through a personal services company will once again be responsible for determining their own employment status and paying the appropriate amount of tax and NIC.
Generous local tax reliefs were announced in the Growth Plan as part of a package of measures to create new Investment Zones. The tax reliefs go beyond those introduced in relation to freeports in 2021 and include a zero rate of employer NICs on new employee earnings of up to £50,270 and a 20% rate of structures and buildings allowance, relieving the cost of investment in qualifying buildings in just 5 years (as opposed to 33 1/3 years under standard rules). The government is currently in discussion with 38 different local authorities; it will be interesting to see whether the enhanced tax reliefs attract businesses to the new investment zones and what the impact will be on the surrounding area.