On September 23rd 2022, Chancellor Kwasi Kwarteng presented his mini-budget and ‘The Growth Plan 2022’, unveiling the biggest package of tax cuts in 50 years and hailing a “new era” for the UK economy.
Mr Kwarteng said a major change of direction was needed to kick start economic growth. The highlights of the changes that look to have the biggest impact on our clients are outlined below and these look to bring significant benefits to owner-managed businesses.
National Insurance Contributions (NICs)
From 6 November 2022 (or as soon as payroll systems can be changed, if later)
- Reverse the 1.25% increase in NICs rates and cancel the Health and Social Care Levy.
- Employee rates will return to 12% and 2%, with an employer’s rate of 13.8%.
- The Self Employed rate will return to 9% and 2%.
Dividend Tax
From 6 April 2023
- The 1.25% increase in the dividend rates across all earning brackets is to be reversed.
- This change also means that the tax rate paid by companies on outstanding loans to participators will reduce too.
Income Tax
From 6 April 2023
- The basic rate of tax is reduced from 20% to 19%.
- The additional rate of income tax of 45% is removed, meaning that the top rate of tax is 40%.
- The additional rate of tax on dividends will also be removed.
Stamp Duty Land Tax (SDLT)
From midnight on 23 September 2023, for the purchase of residential property in England and Northern Ireland:
- The Residential nil-rate threshold increases from £125,000 to £250,000
- The Nil-rate threshold for First Time Buyers’ Relief increases from £300,000 to £425,000
- The maximum amount that an individual is able to pay for a home while remaining eligible for First Time Buyers’ Relief, increases from £500,000 to £625,000
VAT
A digital, VAT-free shopping scheme will be created in order to benefit non-resident visitors.
- Non-UK visitors to Great Britain can obtain a VAT refund on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage.
Corporation Tax
- The planned increase in Corporation Tax from 19% to 25% due to start in April 2023 is reversed
Annual Investment Allowance (Capital Allowance)
- The planned reduction in the AIA limit to £200,000 from 1 April 2023 will be scrapped.
- The AIA limit to be permanently set at £1 million.
IR35 and Off-payroll working
From 6 April 2023:
- The 2017 and 2021 reforms to off-payroll working in the public and private sectors are reversed.
- Workers providing their services via an intermediary will themselves (rather than their employers) be responsible for determining their employment status and paying the correct tax and National Insurance contributions.
Company Share Option Plan (CSOP)
From April 2023
- Qualifying companies will be able to issue up to £60,000 of CSOP options to employees, double the current £30,000 limit.
- The ‘worth having’ restriction on share classes within CSOP will be eased, bringing the rules more in line with those in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies.
Seed Enterprise Investment Scheme (SEIS)
From April 2023
- Companies will be able to raise up to £250,000 of SEIS investment, up from the current limit of £150,000.
- The gross asset limit will be increased from £200,000 to £350,000, and the trading time limit from two to three years.
- The individual annual investor limit of £100,000 will be doubled to £200,000.
New Investment Zones across the UK
- Zones are to be set up in 38 local authority areas in England plus areas to be designated in Scotland, Wales and Northern Ireland.
- They will have relaxed planning controls to release more land for both housing and commercial development.
- Businesses setting up in these zones will benefit from tax breaks including:
- Stamp Duty Land Tax (SDLT), 100% business rates relief, enhanced capital allowances for plant and machinery and enhanced Structures and Buildings Allowance rate and a zero rate of Employers NICs for new employees.
Energy: Non-domestic and business users
- The Energy Bills Support Scheme will provide support for business for a six month period.
- The scheme will be reviewed after three months
- There is the possibility of extension of the scheme for certain business after six months.
Deregulation of banker’s bonuses
- The EU’s cap on bankers’ bonuses is to be lifted in the UK.
Deregulation of pensions
- Draft regulations to reform the pensions regulatory charge cap, will be brought forward, according the Growth Plan.
- This will give defined contribution pension schemes flexibility to invest in the UK’s most innovative businesses and productive assets creating opportunities to deliver higher returns for savers
Please contact FKGB Accounting with any queries as to how you will be impacted by these changes and to discuss tax planning measures as a result.
