The Chancellor Kwasi Kwarteng has outlined a series of tax cuts and economic measures in a massive shake-up of the UK’s finances in this morning’s (September 23rd) mini budget. We will be writing more over the coming days once we have had chance to scrutinise the detail but here are the key points:
Income tax reductions
The reduction in the basic rate from 20% to 19% will be introduced in April 2023 – one year earlier than planned. At the same time, the 45% top rate of tax will be abolished with a single higher band of 40%. This is a significant tax cut announced for next year. Rumours were circulating yesterday regarding the cut in the highest rate of income tax and from next April it will be a reality, however some will argue that this measure will only benefit high earners and does little to assist those that will feel the cost of living crisis the most.
The planned rise on Corporation Tax (CT) from 19% to 25% in 2023 will not go ahead
In the 2021 budget it was announced that for businesses with profits above £250,000 the CT rate would rise to 25%. As predicted, on the election of the new Prime Minister, this policy has now been scrapped.
Annual Investment Allowance (AIA)
From 1 April 2023 AIA for businesses will be permanently set at its highest ever level. This will give 100% tax relief to businesses on plant and machinery investments up to an annual spend of £1m. The measure had previously been temporarily introduced from 1 January 2022 to 31 March 2023.
‘Investment zones’ meaning less red tape for businesses
It was announced that the government is in talks with 38 local and mayoral combined authority areas in England to set up new investment zones. The zones will offer targeted and time-limited tax cuts for businesses in a bid to increase productivity and create jobs.
National Insurance and dividend tax increase to be reversed from 6 November
The increase in Employer National Insurance Contributions and dividends tax to pay for a Health and Social Care Levy has been cancelled. The interim increase in the National Insurance rate, brought in for this tax has also been cancelled. The dividend tax cut will come into effect from April 2023.
Stamp Duty
Stamp duty has been cut with immediate effect. The purchaser of a house will pay nothing on the first £250,000 of a property’s value which is double the current amount allowed. The threshold for first-time buyers is also increased from £300,000 to £425,000. The value of the property on which first-time buyers can claim relief is also increased from £500,000 to £625,000. Economists have argued that this will do little to ease the cost of living crisis but fuel an increase in property prices.
If you have any questions regarding the mini budget, please contact your relationship partner or email enquiries@cowgills.co.uk and one of the team will be in touch.
Disclaimer
The information was correct at time of publishing but may now be out of date.
