What was announced in the mini-budget?

Category: Tax

Kwasi Kwarteng, in his new role as chancellor, unveiled his plans for growth, bringing down inflation, backing businesses, and helping households.

Although much of its content was already known, it still contained a few surprises.

What changes have been made to personal taxation?

The mini-budget has delivered a variety of tax cuts, including:

  • Income tax: the basic rate of income tax is to be reduced to 19% one year earlier than planned in April 2023. In a surprise move, the chancellor also abolished the additional 45% rate of tax from April 2023.
  • National Insurance: 1.25% rise in National Insurance contributions is to be reversed from 6 November.
  • Health and Social care Levy: to be introduced from April 2023, has been scrapped.
  • Dividends: from April 2023 the government is reversing the 1.25% increase to the rate of income tax on dividends which took effect in April 2022.
  • Stamp Duty – the nil rate band will be doubled from £125,000 to £250,000. First-time buyers will pay no stamp duty up to £425,000, and the value of the property on which first-time buyers can claim relief increases from £500,000 to £625,000. This tax cut took effect from midnight today (Friday 23 September 2022). The devolved parliaments in Scotland and Wales will make their own decision on whether they will wish to make similar changes.
  • Alcohol duty: to be frozen for another year.

What changes have been made for businesses?

The headline changes are:

  • Corporation tax: the proposed rise to 25% has been cancelled, keeping it at 19%.
  • Annual Investment Allowance – the £1m allowance is to remain permanent, rather than it returning to £200,000 in March 2023. This gives 100% tax relief to businesses on their plant and machinery investments up to the higher £1m limit.

Has anything changed with Pensions?

Nothing major, but there are a couple of minor changes, with one being quite important to some:

  • Pension investments: the government will change regulations to increase investment by pension funds into UK assets, benefiting savers, boosting economic growth, and incentivising investment into Britain’s science and tech companies.
  • Pension tax relief –The government has confirmed that for the tax year 2023/24, anyone paying certain contributions into a pension will still be able to claim 20% tax relief even though the basic rate of tax is going down to 19%.

Along with the proposals to cap energy costs, many questions are being raised about the affordability of the above changes. Only time will tell, but they will undoubtedly bring an element of relief to many households.

If you want to assess how these changes might affect your financial planning, feel free to book a free no-obligation chat here.

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