The Growth Plan 2022 otherwise known as the mini-budget unveiled by the new Chancellor on Friday was anything but mini. Announcing sweeping tax cuts and reforms in a bold effort to boost economic growth and tackle rising living costs.
As previously announced by the government the EPG will cap the unit price that consumers pay for electricity and gas in the UK. This will mean that the average household will pay no more than £2,500 per year for a period of two years from October 2022. A typical household is expected to save at least £1,000 a year on energy bills.
This will be in addition to the £400 support all households will receive from the Energy Bills
Support Scheme (EBSS) over the coming winter. This support will be delivered in the form of six monthly discounts to your energy bills between October 2022 and March 2023.
The planned cut to the basic rate of income tax from 20% to 19% has been moved forward twelve months by the government and is now to take effect from April 2023.
This will apply to the basic rate of non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland; the savings basic rate which applies to savings income for taxpayers across the UK; and the default basic rate which applies to non-savings and non-dividend income of any taxpayer that is not subject to either the main rates or the Scottish rates of income tax. A four year transition period for Gift Aid relief will apply, to maintain the income tax basic rate relief at 20% until April 2027.
In a controversial move the new Chancellor also announced that additional rate of income tax is to be removed from April 2023. This is the rate of tax tax payers pay on earnings above £150,000 per annum and is set at 45% for non-savings, non-dividend income. This will mean that the highest rate of income tax paid by individuals in the UK, excluding Scotland, will be no more than 40%.
Known as the ‘NHS Levy’ and introduced by Rishi Sunak to help with rising costs for the NHS after the Coronavirus pandemic National Insurance Contributions (NICs) were increased by 1.25%. The new Chancellor has announced that this increase is to be reversed for both Class 1 (paid by employees and employers) and Class 4 (paid by the self employed) NICs from November. And that he is cancelling the introduction of the Health and Social Care Levy as a separate tax from April 2023, applying UK-wide. This will benefit all employees earning more than £12,570 and self employed individuals earning more than £11,909 in 2022-23 or £12,570 in 2023-24. The average saving is around £330 next year and an additional saving of £135 this year.
Likewise the 1.25% increase to dividend tax rates is to be reversed from April 2023. Reducing both the basic rate and higher rate of dividend tax to 2021-22 levels at 7.5% and 32.5% respectively. Due to the abolition of the additional rate of income tax, income that was previously charged at the additional rate, will now be charged at the higher rate of 32.5%.
From 23 September 2022, the government will increase the threshold above which SDLT must be paid on the purchase of residential properties in England and Northern Ireland from £125,000 to £250,000. The government will also increase the relief that first-time buyers can receive. From 23 September 2022, the threshold at which first time buyers begin to pay residential SDLT will increase from £300,000 to £425,000, and the maximum value of a property on which first-time buyers relief can be claimed will also increase, from £500,000 to £625,000.
Previously companies with Profits over £50,000 were due to pay a marginal rate increasing to 25% from April 2023, announced by Rishi Sunak in his most recent budget. This previously announced planned increase will not go ahead. Companies will continue to pay 19% on all of their taxable profits.
The off-payroll working rules more commonly known as IR35 aimed to level the playing field in terms of tax receipts from workers by essentially stopping them from using a limited company known as a Personal Service Company (PSC) to avoid paying the same rate of tax as an employee through PAYE. This was achieved by reforming the rules in 2021 and shifting the responsibility of determining a workers’ status under the IR35 rules from the worker themselves to the end client to which the work was being provided.
The Chancellor has now announced that these rules will be repealed from 6 April 2023, once again allowing workers to be responsible for determining their employment status and paying the appropriate amount of tax.
Either way you cut it this mini-budget is a bold move by the new Chancellor and Prime Minister that is set to cost the treasury around £40 billion. Some will call it a brave move that is needed to boost a stagnating economy others a risky all or nothing gamble.
