What does the government’s mini-budget mean for you?

On Friday 23 September 2022, Chancellor Kwasi Kwarteng delivered the government’s mini-budget, also referred to as the “Growth Plan”. Several important changes were announced and have been summarised in this article.

Taxes

The Chancellor announced the largest set of tax cuts for several decades. The basic rate of tax is being reduced by 1p, bringing it to 19p from April 2023. Additionally, the highest 45p rate of income tax for earnings above £150,000 will be abolished.

The 1.25% National Insurance increase implemented in April 2022 will be reversed on 6 November 2022 and the planned Health and Social Care Levy due to replace this as a standalone tax from April 2023 has been cancelled.

Planned increases in Corporation Tax have also been cancelled and the Chancellor confirmed that the Government plans to reverse the 1.25% increase in dividend tax rates from April 2023. The dividend additional rate will also be removed to match the dividend upper rate, which is going to be reduced to 32.5% from April 2023.

The Chancellor has also announced that the Government is set to review the tax system.

SDLT

The Chancellor has confirmed that Stamp Duty Land Tax (SDLT) is being cut and there will be no SDLT on the first £250,000 of a residential property purchase (previously £125,000). For first time buyers, the threshold will be increased to £425,000 (from £300,000).

This change will be permanent and is effective immediately as of 23 September 2022.

Low-tax Investment Zones

New investment zones will be introduced across the UK which will allow employers to benefit from zero-rate employer NICs on earnings of up to £50,270 per year. This is on the condition that employees of the employers work in these investment zones for at least 60% of their time.

It is estimated that there will be 40 zones that will see reduced taxes for business for 10 years.

Energy Package

The Government has estimated that the energy package will cost £60bn over 6 months from October and an economic forecast will be produced by the Office for Budget Responsibility before the end of 2023.

Bankers’ Bonuses

It has been announced in the government’s mini-budget that the cap on bankers’ bonuses has been cancelled.

IR35 Changes

Recent changes regarding the IR35 rules are going to be reversed from 6 April 2023. The IR35 rules relate to the off-payroll worker and the changes aim to make it less burdensome for end users of companies.

These changes mean that if a contractor engages with a company end user through a personal services company (PSC), it will be the responsibility of that PSC to assess the employment status of the contractor for tax purposes. The end user will not be exposed to PAYE or NIC if the status is incorrect, it will be payable by the contractor or their PSC.

The treasury estimates that this change will cost over £6bn over the next 4 years, but it hopes that this will simplify the tax system.

Trade Unions

In light of the increase in recent strike action, the Government has introduced a new requirement that all pay offers must be subject to a member ballot before strike action can be taken.

Additionally, protection against dismissal due to striking shall be limited to those with a specific length of service. The length of this service has not yet been specified.

If you are considering what the government’s mini-budget means for your and your business or you’d like more in-depth guidance or support on the issues covered in this article, book a free 30-minute consultation with our Employment team today.

This content is correct at time of publication