Mini-Budget September 2022
Posted on 23rd September 2022
***UPDATE: THIS HAS NOW LARGELY BEEN REPLACED FOLLOWING THE AUTUMN BUDGET 2022...read details here***
Following the resignation of Boris Johnson, a leadership contest and the recent passing of Queen Elizabeth II, today we returned to politics with the new Chancellor announcing a mini-budget to urgently address the cost of living crisis. The announcements were made this morning and here we summarise the headlines and key points.
Personal Tax Changes - Income Tax & National Insurance
The basic rate of income tax will reduce from 20% to 19% effective from April 2023
The additional rate of income tax (45% for income over £150k) will be scrapped from April 2023
Income tax on dividends were increased by 1.25% from April 2022 - but this will now be reversed. This takes dividends tax rates from 8.75% back to 7.5% and 33.75% back to 32.5% (reversing them to pre April 2022 rates)
National Insurance rates increased by 1.25% for both employers and employees from April 2022 - this is now reversed. This takes employees rates from 13.25% back to 12.5% and employers rates from 15.05% back to 13.8%.
Business Tax Changes
The rate of Corporation Tax was due to rise to 25% but this increase has now been scrapped, leaving the Corporation Tax rate at 19%.
The Annual Investment Allowance (enabling businesses to obtain 100% tax relief on eligible purchases of plant and machinery) was due to be reduced to £200k, but will now remain at £1m.
Stamp Duty
Stamp duty will now only apply on purchases on homes from £250k (was £125k). This only applies to purchases of your main, residential home (not on buy-to-let properties).
Health and Social Care Levy
The 1.25% additional levy announced in the last budget has now been scrapped. This was originally announced to support funding into the NHS but has been scrapped to aid people with the ongoing cost of living crisis.
IR35
IR35 reforms, known as "off-payroll working" in 2017 and 2021 had made it much harder for contractors to offer their services via their own limited companies. These reforms made it the responsibility of the client to determine a contractors' IR35 status - and this pushed many out of the contractor market.
These resulted in many directors closing their personal service companies and going into employment.
From 6 April 2023 these rules will be reversed, meaning contractors will be responsible for determining their own employment status.
This will help contractors to win contracts, but will also benefit businesses looking for flexible workers, who they don’t have to employ.
There will be a significant amount of details to be released on this. We appreciate that this is a big announcement, impacting a large number of our clients - and we will be in touch as more details are released.
Energy Costs
For domestic households:
£2,500 price cap already introduced for households, for a period of 2 years from October 2022.
This should be a saving of £1,000 a year on previous energy increases.
This is in addition to the £400 support for all households over the coming Winter.
For households using alternative heating fuels (eg oil) there will be an additional payment of £100.
For businesses and other non-domestic energy users:
There will be a 6 month scheme “the Energy Bill Relief Scheme” to protect businesses, charities and public sector organisations by providing discounts on wholesale gas and electric prices.
This will be reviewed in March 2023.
In the longer term the Government are looking at other strategies including:
identifying the most vulnerable non-domestic customers and how to assist them.
a new Energy Supply Taskforce to negotiate long-term agreements with major gas producers.
a new pricing system, to better reflect the UK’s home grown cheaper and low-carbon energy sources.
new legislation will be brought forward for energy suppliers to help customers to reduce their energy bills
Additional Announcements
There are, as always, other announcements - and you can read these further in the media. These cover cap on bankers' bonuses being reversed, alcohol duty being frozen etc. We recommend this gov.uk article for further reading.
Summary
As with all Budgets and government annoucements - we are hearing these headlines today and more detail will be released over the coming days. As ever, the devil is in the detail and we need time to read and digest.
We will be in touch with our clients who may be affected, in the coming week.
If you have any questions on this, please get in touch!
Written by:
Nicola J Sorrell - Effective Accounting
Founder | Xero Champion | IR35 Expert
Tagged as: Budget & Tax Rates
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