The financial and political turmoil over the past few weeks has left the country in tatters. After only 3 days in the job and a long weekend of discussions with the PM, the new chancellor is determined to stabalise markets, and the economy and regain confidence and trust in the UK.
The hole in the public finances means there isn’t room for tax cuts. We already know that the 45% additional rate of Income Tax for those with income exceeding £150k will remain and the plan to increase Corporation Tax to 25% from next April will still go ahead.
Just 24 days after the mini-budget, Jeremy Hunt has today announced further reversals of what was announced in Kwasi’s ‘The Growth Plan’.
- From April 2023, the basic rate of Income Tax at 20% and higher dividend tax rates of 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers will remain as it is now
- The horrifically complicated off-payrolling/IR35 reforms are here to stay for self-employed contractors’ operating through their own personal service companies
- VAT will still be payable by visitors to the UK and the duty payable on alcohol will be unfrozen!
What will stay is
- The slightly lower National Insurance (NIC) rates from 6 November and the Stamp Duty Land Tax cuts for individuals will save £2,500 on a house purchase
- The abolition of the Health and Social Care Levy
- The £1m annual investment allowance (AIA) providing 100% tax relief on qualifying plant and machinery purchases, the Seed Enterprise Investment Scheme, and the tweaks to Company Share Option Plans for businesses
A two-year freeze on the energy price cap at £2,500 will now only last until next April instead of October 2024. However, for those individuals and businesses in need, the support will be reviewed next spring.
Meanwhile, we need to brace ourselves for soaring energy bills and increased mortgage costs – especially as the personal allowance and basic rate tax bands are frozen until April 2026 alongside the announcement that the 20% Income Tax rate will now remain ‘indefinitely’. Whilst businesses will welcome the continuation of the £1m AIA, those operating as limited companies will need to continue to factor in the higher dividend tax rates and the planned increase to Corporation Tax from next April in their cash flow.
As ever, we are here to help you and your business manage the ebbs and flows – please do not hesitate to contact your usual contact to help you navigate the current ‘road’ system on 01223 810100.
The new chancellor will publish his full ‘Medium-Term Fiscal Plan’ on 31 October 2022 alongside the long-awaited forecast from the Office for Budget Responsibility (OBR). The chancellor is expected to announce further changes to the fiscal policy on 31 October which we hope will put the public finances on a sustainable footing.
