Mini Budget 2022

Posted by jonathanfullarton - September 30, 2022 4:27 pm Mini Budget

Update following Chancellor Jeremy Hunt’s Statement

Monday 17 October

Today, newly appointed Chancellor of the Exchequer Jeremy Hunt made a statement ahead of the Autumn Budget, Thursday 17 November, in which he reversed nearly all the tax cuts previously announced in the Mini Budget.

The only tax cuts staying will be:

Changes to Stamp Duty Land Tax (SDLT) 

  • The SDLT threshold has doubled to £250,000
  • The first-time buyer (FTB) SDLT threshold has increased to £425,000
  • The maximum property value on which FTB relief can be claimed has increased to £625,000

Plans to scrap the Health & Social Care Levy, due to come into effect from April 2023

The interim 1.25% increase to National Insurance contributions will be scrapped on 6 November this year, for both employees and employers. 

Taxes which have been scrapped

  • Planned cut to the basic rate of income tax has been put on hold until, “economic circumstances allow for it to be cut“.  The basic rate of income tax will, therefore, remain at 20%.
  • The energy price cap will be supported until April 2023, but not for two years as previously announced.  
  • The proposed plans to simplify IR35 (off-payroll working) rules by repealing the 2017 and 2021 Reforms have also been scrapped.
  • Planned Dividend Tax cut will also be abolished.
  • VAT free shopping for non-UK nationals will be abolished.
  • The Alcohol duty freeze, planned from April 2023, has also been scrapped.

We believe the next announcements will be made as part of the Government’s Medium-term fiscal Plan (Autumn Budget) on Thursday 17 November.  We will keep you posted on any further developments after that time.

Update: Government now announces U-turn on plans to scrap the planned increase in Corporation Tax

Friday 14 October

Today, Prime Minister Liz Truss sacked Mr Kwasi Kwarteng following the turmoil which his recent Mini Budget has caused, merely weeks after appointing him as her Chancellor of the Exchequer.  She has replaced him with Mr Jeremy Hunt, the former Secretary of State for Health and Social Care.

She also announced another U-turn, this time regarding the Mini Budget plans to scrap the planned increase in Corporation Tax, originally announced by former Chancellor Rishi Sunak, which was due to see the rate of Corporation Tax in the UK increase from 19% to 25% as of April 2023, and which will now go ahead in the form initially advised by the Government.

With a sacked Chancellor and two U-turns already these are obviously very turbulent times in the House of Commons.  Prime Minister Liz Truss’s leadership is under fire following the markets’ reaction to the Mini Budget, the effect it has had on the Pound and the damage to pension pots that has ensued.  Further turbulence cannot be ruled out before the scheduled Budget on 31st October.  

Update: Government announces U-turn to 45% income tax rate proposed scrapping

Monday 8 October

Ahead of the Conservative Party conference, the government has abandoned plans to abolish the 45% top rate of income tax after media scrutiny, pressure from within the Conservative party and a turbulent week for the economy, with the pound falling to a record low against the US dollar.

Chancellor Kwasi Kwarteng announced the decision earlier this morning via Twitter, saying in a statement “we get it, and we have listened”.

We will have to wait and see if any other announcements are made during or immediately after the conference, and we will keep you updated of any changes that may affect you.

For the rest of the Mini Budget highlights, please see below.

Highlights from today’s Mini Budget

Friday 23 September

Today, Chancellor Kwasi Kwarteng delivered his first Mini Budget, in a bid to stimulate the UK economy and drive growth at a targeted rate of 2.5% per annum, largely delivered through a range of tax changes.  Here are the highlights:

Cost of Energy Crisis

The government has taken three steps to support individuals and businesses to cope with the cost of the energy crisis.  These are as follows: 

  1. The Energy Price Guarantee will limit the unit price that consumers pay for gas and electricity to £2,500 for an average household for the next two years, saving a typical household £1,000 per annum based on current energy prices.  The promised additional £400 payment off winter bills for all UK households will still go ahead and extra support will be provided for more vulnerable households
  2. Announced yesterday, the new Energy Bill Relief Scheme will reduce wholesale gas and electricity prices for all UK businesses including charities and the public sector, (such as schools and hospitals).  This will provide a price guarantee for all UK businesses equivalent to the one provided for households.
  3. Energy prices are extremely volatile with prices rising and falling on an hourly basis, creating challenges for energy providers.  To combat this the government has introduced an Energy Markets Financing Scheme, which will have the backing of the Bank of England. 

Tax changes

The Chancellor said, during his speech, that, “Tax is central to solving the riddle of growth”.  He announced that he will wind down the Office of Tax Simplification (OTS) instead making it everyone’s mandate within the government to simplify tax.  Measures announced today were:

  • Scrapping the planned increased in Corporation Tax CT), set to rise next year from the current level of 19% to 25%.
  • The Bank CT Surcharge rate to remain at 8%.
  • The Annual Investment Allowance (AIA), which provides 100% tax relief on investments in plant and machinery, will not now fall to £200k as planned but will remain at the current rate of £1m permanently.
  • The Enterprise Investment Scheme and the Venture Capital Trust extended beyond 2025.
  • The Seed Enterprise Investment Scheme and Company Share Option Plans will see limits increased to make them more generous.
  • To help remove unnecessary costs for businesses the government will:
    • All EU Regulations will be reviewed, replaced and EU Law repealed, as necessary, by December 2023, to reduce the burden on business and help stimulate growth.
    • Simplify IR35 (off-payroll working) rules by repealing the 2017 and 2021 Reforms whilst continuing to keep compliance under close review.

Personal Taxation

  • The Additional Rate of Income Tax, currently at 45% on income above £150,000, will be abolished. STOP PRESS: A U-turn was made on Monday 3 October so this planned cut will now no longer occur.
  • The Basic Rate of Income Tax will reduce from 20% to 19% from April 2023, one year earlier than promised

National Insurance 

Yesterday, the government announced plans to scrap the Health & Social Care Levy, due to come into effect from April 2023.  The interim 1.25% increase to National Insurance contributions will be scrapped on 6 November this year, for both employees and employers. 

Stamp duty land tax (SDLT)

With effect from today, the following changes to SDLT:

  • The SDLT threshold will double to £250,000
  • The first-time buyer (FTB) SDLT threshold increases to £425,000
  • The maximum property value on which FTB relief can be claimed increases to £625,000

New Investment Zones 

New Investment Zones to liberalise planning rules in specified agreed sites to release land and accelerate development.

  • Taxes will be cut for businesses in designated tax sites for ten years and there will be accelerated tax reliefs for the following:
    • Structures & Buildings
    • 100% tax relief on qualifying investments in plant and machinery.
    • No stamp duty will be payable on purchases of land acquired for commercial or new residential development
    • On newly acquired business premises, there will be no business rates to pay.
    • If a business hires a new employee in the tax site, the employer will pay no National Insurance on the first £50,000 the employee earns. 

Other changes

  • A new VAT free shopping scheme for overseas shoppers will be introduced.
  • The planned increases in Alcohol Duty for beer, cider, wine and spirits is scrapped and Draught Relief will be extended to cover smaller kegs of 20 litres or above to help smaller breweries. 

Summary

This not so mini “Mini Budget” is designed to tackle rising energy costs and inflation, and promote economic growth. In what was billed as the start of a new era, we saw a return to traditional Conservative economics; reversing planned tax increases, going further still by cutting personal and business taxes, and introducing measures to reduce regulations in a range of areas.
 If you wish to discuss any of the announcements, please get in touch with your usual
MFW contact.