Highlights from the 2022 Mini Budget
Highlights from the 2022 Mini Budget
Go to the most recent 2023 Chancellor’s Spring Budget.
The mini-budget was almost entirely reversed by the new Chancellor, Jeremy Hunt on Monday 17 October 2022. For an update, please jump to the bottom of the page for the PDF guide.
With a new Chancellor, a new Prime Minister, and a new Head of State, there is no doubt that the UK is entering into a “new era” as announced by Kwasi Kwarteng in his first official budget. Despite it being dubbed a “mini budget”, it was certainly anything but with the largest tax cuts announced since 1972.
Kwarteng started his budget as expected with his plan on how the UK will tackle the rising energy costs crisis. He outlined a 3-step approach which included:
- an energy price guarantee so that families will have an energy bill of no more than £2,500 for two years (saving £1,000 per household)
- the equivalent support for businesses, charities, and the public sector
- launching an ‘Energy Markets Financing’ scheme that will be delivered by the Bank of England
These measures are estimated to cost £60 billion for six months from October.
The top headline during the whole announcement which did not go unnoticed by anybody was the cut to income tax. Basic rate income taxpayers will pay 1% less (19% down from 20%) from next April 2023 instead of April 2024 as was previously planned. Not only that, but from April 2023, the Additional Income tax rate of 45% will be completely abolished so that there will only be a single higher rate of income tax of 40%.
As the new Chancellor, Kwarteng chose to revoke the previous Chancellor’s tax plan of raising corporation tax. It was expected that corporation tax would increase at a tapered rate up to 25% from April 2023, however this has now been cancelled. Corporation tax rates will be staying at 19% for all businesses.
The National Insurance increase of 1.25% which was introduced by Rishi Sunak and came into force April this year to help fund health and social care services will now be scrapped from 6 November 2022. The government predict that this will allow 28 million people to keep an extra £330 of their money on average next year and 920,000 businesses will be able to save almost £10,000 due to this change.
Welcomed by many contractors, Kwarteng announced he will repeal the 2017 and 2021 reforms to off-payroll working rules. The law was originally put in place to stop companies from hiring employees as independent contractors in order to avoid paying national insurance as well as other statutory pays. Although it is not clear yet exactly what changes will take place, the government have asserted that compliance will still be kept under review.
Appealing to homebuyers and as a way to encourage growth, the Chancellor has doubled the stamp duty threshold so that no stamp duty will be paid on the first £250,000 instead of the previous £125,000. He is also providing further support to first time buyers who will pay no stamp duty up to £425,000 and has increased the threshold for first time homebuyers’ relief to £625,000 up from £500,000. This measure has come into force immediately.
Annual Investment Allowance
To further bolster support for businesses, the Chancellor has permanently fixed the Annual Investment Allowance (AIA) for businesses investing in plant and machinery at £1 million. This is yet another reverse change from his predecessor as AIA was due to be reduced down to £200,000. The hope is that by permanently allowing such generous tax reliefs, businesses will find the confidence to invest in growing.
Historically, SEIS has been amended many times since its exception, but today’s announcement adds to yet another of the Chancellor’s tax breaks. From April 2023, qualifying companies will now be able to raise £250,000 in SEIS investment, up from £150,000. Their eligibility criteria have also been widened so that their gross asset limit will be £350,000 up from £200,000 and their age limit increases to 3 years instead of 2 years. This is not only good news for start-ups but for investors as their tax relief limit will increase to £200,000 from £100,000.
Advice on the Mini Budget 2022
For any advice on what all the new tax changes may mean for you or your business, please feel free to get in touch with us. Alternatively, for political and macro-economical commentary to explain what these tax changes will mean, please access a free commentary piece from Blonde Money.