Mini budget – a quick recap

Published by Sandra Smith on

Mini budget – a quick recap

The new Chancellor Kwasi Kwarteng announced a series of tax cuts and changes in his mini budget. This mini budget was all about cutting taxes to try and help boost growth. 

Here is a quick recap of the mini budget key changes:

Corporation tax  

The corporation tax increase due in April 2023 (195 to 25%) is now not happening.

Income tax  

From April 2023, the basic rate of income tax will be cut to 19%. An estimated 31m people should be receiving an extra £170 per year more. At the moment employees pay 20% on any annual earnings between £12,571 to £50,270.

The 45% higher rate of income tax will also be abolished with just one single higher rate of income tax of 40% also being introduced in April 2023. Dividend tax of 38.1% will also be abolished so it is worth thinking about the future of any future dividends.

The new Health and Social Care Levy (to help fund the NHS) will now not be implemented.

Stamp duty 

Stamp duty land tax will be increased on residential properties immediately from £125,000 to £250,000. First-time buyers will see an increase from £300,000 to £425,000 (with the maximum value of a qualifying property going up to £625,000).

Investing in business 

The IR35 rules (the govern off-payroll working) are to be simplified. 

The annual investment allowance (the amount companies can invest tax free) was due to reduce to £200,000 in April 2023. This will now remain at £1m indefinitely.

EIS/VCT investment schemes will be extended beyond 2025.

Share options for employees has now doubled from £30,000 to £60,000.

Pension funds have seen a regulation change which can increase UK investments. 

There will also be a new SEIS scheme (seed enterprise investment scheme) for new and start-up companies where they are able to raise up to £250,000, providing tax relief to investors. The time limit will also be extended to three years.

Interest rates

With the pound falling to a record low following the announcement of the UK’s biggest tax cuts in 50 years. Many predict that the Bank of England will look to raise interest rates again in an effort to help calm inflation.

September saw the seventh interest rate rise in a row and the highest level we have seen in 14 years.

Low-tax investment zones

New low-tax investment zones were launched with 38 potential areas in discussions in developing tax breaks to encourage businesses to set up in these locations. 

These areas will also see new sites designated for housing development. Some of the benefits for any business operating in one of the new low-tax investment zones will include new business premises benefiting from a 100% business rates cut. Councils hosting the zones will receive 100% of the business rates growth. There will also be an enhanced capital allowance scheme and employers will have zero-rate NIC’s on the salary of any new employee up to £50,270 pa.

Sean Daniel, Managing Director said “The mini budget was all about cutting taxes in order to stimulate growth. This quick recap covers the headline announcements made by the Chancellor Kwasi Kwarteng”.

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