Following the mini budget update on Friday 23rd September 2022, we summarised the highlights and the details of the budgets. Subsequent to this, as has been widely reported, the government made a drastic U-turn!
Jeremy Hunt announced a statement on 17th October 2022, which effectively reversed a lot of the cuts promised by Liz Truss and the previous chancellor, and we have summarised the changes below.
Highlights
Income tax
Effective from 6th April 2023, the basic rate of income tax is being decreased to 19%.
Update 17 October 2022: Decrease cancelled.
The additional rate of income tax at 45% is being abolished and replaced with one single higher rate tax of 40%.
Update 17 October 2022: Additional rate of income tax at 45% reinstated.
Corporation tax
Corporation tax was set to rise from 19% to 25% on 6th April 2023, this has now been cancelled and corporation tax will remain at 19%.
Update 17 October 2022: The planned corporation tax rate rise to 25% has been reinstated.
Stamp duty
From 23 September 2022, you will not pay any stamp duty on the first £250,000 of the property value (doubled from £125,000) and first time buyers will now pay no stamp duty up to £425,000 (up from £300,000).
There has also been an increase in the value of the property on which first time buyers can claim relief from £500,000 to £625,000.
Update 17 October 2022: Stamp Duty cuts remain.
National insurance rates
The 1.25% rise in national insurance contributions which took effect earlier this year will be reversed from 5th November.
Update 17 October 2022: The National insurance rate reduction remains.
Contractors IR35
The government promised reform of IR35 tax rules for the self-employed which can result in them being taxed as if they were employees.
Reforms to the system introduced in 2017 and last year will be scrapped.
Update 17 October 2022: IR35 tax rules for the self-employed which can result in them being tax as employees reinstated.
Investment tax
The rise in tax on dividend income, which was linked to the rise in National Insurance rates will also be reversed.
Dividend tax from 6th April 2023 will be 7.5% for the basic rate and 32.5% for the higher rate.
Update 17 October 2022: The dividend rate reduction has been cancelled.
The detail
The Growth Plan 2022 makes growth the government’s central economic mission, setting a target of reaching a 2.5% trend rate.
They believe that sustainable growth will lead to higher wages, and greater opportunities and provide sustainable funding for public services.
Update 17 October 2022: Following the market turmoil caused by the mini budget on 23rd September it seems they have made dramatic U-turns on all their announcements. Who knows what their new economic mission is!
Income tax rates
The basic rate of income tax will be cut to 19% from 6th April 2023, 12 months earlier than planned.
This will apply to non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland.
A four-year transition period for Gift Aid relief will apply, to maintain the income tax basic rate relief at 20% until April 2027.
There will also be a one-year transitional period for Relief at Source (RAS) pension schemes to permit them to continue to claim tax relief at 20%.
The additional rate of income tax will also be removed from 6th April 2023. This will apply to the additional rate of non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland.
Update 17 October 2022: A cut in the basic rate of income tax – which had been promised by two chancellors this year, has been cancelled. Jeremy Hunt has said the basic rate of income tax will stay at 20% indefinitely. This means your income tax rates will remain unchanged.
The additional rate for savings, dividends and default rates will also be removed from 6th April 2023, and this change will apply UK-wide.
As the additional rate of income tax will be removed current additional rate taxpayers will also benefit from the Personal Savings Allowance of £500 for higher rate taxpayers.
Update 17 October 2022: The proposed abolition of the 45% additional rate of tax, which is paid by people who earn more than £150,000 a year, had already been ruled out.
National Insurance
From 6th April 2022, the rate of National Insurance contributions across all classes (except Class 2 and 3) was increased by 1.25%.
However, as announced on 23 September 2022, these rates are reverted to historical rates with effect from 6 November 2022.
Furthermore, the new Health and Social Care Levy, which was due to take effect on 6th April 2023 is now scrapped.
There are no changes to the Primary Threshold and Lower Profits Limit which were increased from £9,880 to £12,570 in July 2022. These are aligned with the personal allowance threshold.
Update 17 October 2022: No changes – this announcement remains.
Dividend rates
The government is reversing the 1.25% increase in dividend tax rates applying UK-wide from 6th April 2023.
Alongside the reversal of the Health and Social Care Levy, the ordinary and upper rates of dividend tax will be reduced to 2021-22 levels of 7.5% and 32.5% respectively.
Due to the abolition of the additional rate of income tax, income that was previously charged at the additional rate will now be charged at the upper rate of 32.5%.
The reduction of all rates by 1.25% will benefit 2.6 million taxpayers with an average benefit of £345 in 2023-24, and additional rate payers will further benefit from the abolition of the additional rate of dividend tax.
Update 17 October 2022: the reduction in dividends rates has been reversed, this means dividend tax rates will remain at: basic rate 8.75%, higher rate: 33.75% and additional rate 39.35%.
Corporation tax
The corporation tax rate will remain at 19%, irrespective of the profit levels. The chancellor scrapped the increase in corporation tax rates which was due to take place on 6th April 2023.
S.455 tax rate on directors’ overdrawn loan accounts will remain at 32.5%.
Update 17 October 2022: the announcement that corporation tax will remain at 19% has been reversed. From April 2023 the main rate of corporation tax will be 25% for Companies with profits of £250,000 or more. A small profits rate of 19% will exist for Companies with profits of £50,000 or less and any Companies with a profit of between £50,000 and £249,999 will pay a tapered rate of tax between 19-25%.
Stamp Duty Land Tax
SDLT thresholds for residential properties in the UK have increased from 23rd September 2022 as below:
Residential properties: 23 September 2022 onwards
| Property value | UK Residents | Non-UK Residents | ||
| Only property | Additional property | Only property | Additional property | |
| Up to £250,000 | Nil | 3% | 2% | 5% |
| Next portion from £250,001 to £925,000 | 5% | 8% | 7% | 10% |
| Next portion from £925,001 to £1,500,000 | 10% | 13% | 12% | 15% |
| Remaining amount above £1,500,000 | 12% | 15% | 14% | 17% |
From the 23rd of September 2022, first-time buyers will not pay SDLT up to a property value of £425,000, and 5% SDLT will be due on the portion from £425,001 to £625,000.
If the price is over £625,000, there is no relief available.
Update 17 October 2022: This remains, no changes.
Personal Investment allowances (EIS, VCT, SEIS, CSOP)
The Chancellor set out his determination to make this country an entrepreneurial, share-owning democracy.
He announced that the Enterprise Investment Scheme and the Venture Capital Trusts will be extended beyond 2025.
The limits for the Seed Enterprise Investment Scheme and Company Share Option Plans will be increased to make them more generous.
These schemes offer private investors generous tax benefits such as income tax relief, and exemption from capital gains tax and inheritance tax and they are a vital part of driving investment for new start-up companies.
Update 17 October 2022: This remains, no changes.
Off-payroll working (IR35) reforms repealed
From 6th April 2023, the recent reforming rules for the public sector (2017) and private sector (2021) are repealed.
From that date, workers providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and National Insurance contributions.
This will free up time and money for businesses that engage contractors, the reform also minimises the risk that genuine self-employed workers are impacted by the underlying off-payroll rules.
Update 17 October 2022: IR35 tax rules for the self-employed which can result in them being tax as employees reinstated.
Annual Investment Allowance (AIA)
The Chancellor has announced that the £1 million level of AIA (which was due to end on 31st March 2023) has been made permanent.
This means businesses can deduct 100% of the costs of qualifying plants and machinery up to £1 million in the first year.
Update 17 October 2022: This remains, no changes.
Investment Zones
Businesses in designated areas in investment zones will benefit from 100% business rates relief on newly occupied and expanded premises.
Local authorities hosting Investment Zones will receive 100% of the business rates growth above an agreed baseline in designated sites for 25 years.
In addition, businesses will receive full stamp duty land tax relief on land bought for commercial or residential development and a zero rate for Employer National Insurance contributions on new employee earnings up to £50,270 per year.
To incentivise investment there will be a 100% first year enhanced capital allowance relief for plant and machinery used within designated sites and accelerated Enhanced Structures and Buildings Allowance relief of 20% per year.
Update 17 October 2022: Not clear whether this remains.