Information correct as of 23 September 2022
Chancellor Kwasi Kwarteng unveiled the government’s ‘Growth Plan’ package this morning which outlined over 30 measures to address the current economic challenges. Borrowing, deregulation and tax cuts were the themes of the Chancellor’s first key statement ahead of a full Autumn Budget in November.
The statement was a stark comparison to the subdued Spring statement given by Rishi Sunak earlier this year and follows this week’s announcement from the Bank of England confirming a 0.5% increase to interest rates. As expected, initial reactions have been wide-ranging, from the Federation of Small Business commenting “the mini Budget delivers some pro-small business measures” to the TUC describing the statement as “Robin Hood in reverse”.
We hope the following highlights, which we feel will be the most significant to our clients, will prove to be helpful.
Personal
National Insurance Contributions NICs: The Health and Social Care Levy, which took effect in April 2022 as a 1.25% increase to National Insurance has been scrapped. Today’s announcement confirmed that this increase will no longer apply as of 6 November 2022.
This cancellation to the Heath and Social Levy means that 28 million people will save, on average, £330 in 2023/24.
Income Tax Basic Rate Band: The government has followed through with their intentions to reduce basic rate tax from 20% to 19%, providing a saving of 1 pence for every £1 earned. Initially anticipated that this would come into effect from April 2024, it was confirmed today that this reduction will take effect from 6 April 2023. This planned reduction should save 31 million people, on average, £170 on average per year.
Whether this change will be adopted by Scotland, who set their own income tax rates for non-savings and non-dividend income is yet to be seen.
Additional Rate Tax Band Abolished: The additional rate of tax of 45% for individuals earning above £150,000 is to be abolished from 6 April 2023. In its place, the upper rate tax band of 40% will apply. NOTE: this change was subsequently scrapped on 3 October 2022
Again, whether this change will be adopted by Scotland, who set their own income tax rates for non-savings and non-dividend income is yet to be seen.
Reversing The Dividend Tax Increase: The government is reversing the 1.25% increase in dividend tax rates which was due to apply UK-wide from 6 April 2023. Alongside the reversal of the Health and Social Care Levy, the ordinary and upper rates of dividend tax will be reduced to the 2021/22 levels of 7.5% and 32.5% respectively.
Stamp Duty Land Tax (SDLT): There is to be an immediate change to SDLT in England and Northern Ireland. The current nil rate band of £125,000 has been doubled to £250,000 from 23 September 2022 for all home purchases. First time buyers will also see an increase in their nil rate band from £300,000 to £425,000. The maximum value of a property on which first-time buyers’ relief can be claimed will increase from £500,000 to £625,000.
Energy Price Cap: As announced earlier this week, the government is to place an “energy price guarantee” on the price of energy units (kWh), from 1 October 2022 for two years. This energy price guarantee is to be set at 34p per kWh of electricity and 10.3p per kWh of gas. This price guarantee will apply to people on standard variable tariffs/default energy tariffs, regardless whether they pay direct debit, standard credit or on a prepayment meter. The price guarantee will not apply to anyone on a fixed-term energy tariff or a standard variable green tariff. The government believe that this price guarantee will mean a typical household’s energy bill will be £2,500 a year on average from 1 October 2022 onwards.
However, please note this is an average and is not a fixed limit on what a household might pay. Your household energy bill will depend on how much energy you use.
Energy Bill Discounts: A number of energy bill discounts were initially announced back in July 2022.
The standard £400 discount will automatically apply to all households and come into effect from October 2022. This discount will be administered over 6 months. Households with domestic electricity meters that are paid for via standard credit, payment card or direct debit will see a discount of £66 to their energy bills in October & November 2022, rising to £67 each month from December 2022 through to March 2023. Households with prepayment meters will be provided with discount vouchers from the first week of every month. These discount vouchers will be administered via SMS text, email or post, using the customer’s registered contact details.
This discount will also apply to students or other tenants who rent properties, where fixed energy costs are included in their rental charges. In these circumstance, the landlords will need to pass on the discount to the tenants in order to keep in line with Ofgem rules.
In addition to the £400 discount, households most in need are eligible for further support:
- households on Means Tested Benefits are eligible for a further £650 in two lump sums – £326 in July 2022 (or September 2022 if on Tax Credits) and £324 in Autumn 2022 (Winter 2022 if on Tax Credits)
- pensioners receiving the Cost of Living Payment are eligible for a further £300 to be paid alongside the winter fuel payment between November & December 2022
- individuals receiving the Disability Cost of Living Payment are eligible for a further £150 to be paid from 20 September 2022
- other help – the Household Support Fund will be available from local councils to support vulnerable households with the cost of living crisis.
Universal Credit – Increase to Administrative Earnings Threshold (AET): From January 2023, the government is increasing support and incentives for those on Universal Credit across Great Britain by increasing the Administrative Earnings Threshold to 15 hours a week at National Living Wage for an individual claimant and 24 hours a week for couples.
Strengthening the Universal Credit (UC) Sanctions Regime: Alongside the changes to AET, the government will be strengthening the sanctions regime to set clear work expectations, including applying for jobs, attending interviews or increasing the hours, in return for receiving Universal Credit. Claimants who do not fulfil their job-search commitment without good reason could have their benefits reduced.
Alcohol Duty Frozen: There will be a freeze on the duty rates for all categories from 1 February 2023.
Business
Energy Bill Relief Scheme (EBRS): As well as an energy price cap for domestic households, the government also announced an energy price cap for businesses and other non-domestic energy users, including charities and public sector organisations such as schools. This new six month scheme is to begin from October 2022. Energy suppliers will automatically provide a discount on electricity and gas unit prices in England, Scotland and Wales at the “government supported price” cap of £211 per MWh for electricity & £75 per MWh for gas. A comparable rate will be set shortly for Northern Ireland. The government will then compensate the suppliers for the difference between this rate and the actual wholesale rate. For comparison the expected wholesale rate is expected to be around £600 per MWh for electricity & £180 per MWh for gas, so this should prove to be a large saving for non-domestic users.
Corporation Tax Rate: The planned increase in the UK Corporation Tax rate from 19% to 25%, that was due to take effect in April 2023, will not go ahead. Companies will continue to pay 19% on their taxable profits.
Annual Investment Allowance: The government are making the temporary £1 million level of the Annual Investment Allowance permanent, instead of letting it fall to £200,000 after 31 March 2023. The aim is to support business investment, provide businesses with more stability, and make tax simpler for any business investing between £200,000 and £1 million in plant and machinery.
VAT Free Shopping: A digital, VAT-free shopping scheme is to be introduced, with the aim of providing a boost to the high street and creating jobs in the retail and tourism sectors. The new scheme for non-UK visitors to Great Britain will enable them to obtain a VAT refund on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage.
Off-Payroll Working Reforms (IR35): The 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023. From this date, workers across the UK providing their services via an intermediary, such as a personal service company, will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.
Seed Enterprise Investment Scheme (SEIS): From April 2023, companies will be able to raise up to £250,000 of SEIS investment, a two-thirds increase. To enable more companies to use SEIS, the gross asset limit will be increased to £350,000 and the age limit from 2 to 3 years. To support these increases, the annual investor limit will be doubled to £200,000.
Investment Zones: The government will work with the devolved administrations and local partners to introduce Investment Zones across the UK. Areas with Investment Zones will benefit from tax incentives, planning liberalisation, and wider support for the local economy.
As always, the information outlined above is for general guidance purposes only. We appreciate that every individual and business has different circumstances and you should always seek appropriate professional advice before you act on any of the information provided.
If you would like more information on any area referred to in the mini-budget or require wider business guidance, please do get in touch with us.
