Analysis and commentary from FPM’s team of tax experts, identifying the key changes and outlining the practical implications for you and your business.
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The newly appointed Chancellor, Kwasi Kwarteng, delivered a “mini budget” on Friday 23rd September which consisted predominantly of taxation reductions, but there were a couple of surprises within the detail.
The FPM Mini Budget Guide will help you to check the main changes that could impact you or your business. A summary of the key points is laid out below.
Mini Budget: Key Takeaways
- Planned Corporation Tax (CT) rate increase to 25% from April 2023 cancelled
- Annual Investment Allowance (AIA) limit to remain at £1m permanently
- 1.25% National Insurance (NI) increase to be reversed with effect from 6 November 2022
- Additional rate of income tax (45%) to be abolished effective from April 2023
- Basic rate of income tax cut to 19% effective from April 2023
- Stamp Duty Land Tax (SDLT) 0% threshold increased to £250k, additional first time buyer reliefs enhanced
- IR35 rules are to be simplified
- Early discussions around creating 40 ‘investment zones’ offering a number of tax incentives
- Some changes to tax savings/investments
- Dividend ordinary rate of 8.75% will reduce to 7.5% from April 2023
- Dividend upper rate of 33.75% will reduce to 32.5% and the additional rate will be abolished
- Tax due on overdrawn directors’ loan accounts will reduce to 32.5% for loans made on or after 6 April 2023
Explained by the experts
There are three central priorities for stimulating the economy:
- Reforming the supply side of the economy;
- Maintaining a responsible approach to public finances;
- Cutting taxes to boost growth.
In repsonse to the recent announcement, FPM’s Senior Tax Manager, Seamus McElvanna says: “The cut in the income tax rates is aimed at incentivising enterprise and hard work whilst simplifying the tax system. The changes will apply in England, Wales and Northern Ireland, it remains to be seen what the Scottish government will do in due course.
“The plan to increase the corporation tax rate to 25% from April 2023 will not go ahead, so the majority of companies will retain the 19% rate of tax. The 19% is lower than the rest of the G7 and is also the lowest in the G20.
“Investment Zones will be created across the UK. The government plan is that these zones will benefit from lower taxes and liberalised planning frameworks to encourage investment. In practical terms, businesses in the designated areas will benefit from 100% business rates relief on newly occupied and expanded premises. Also, businesses will receive full Stamp duty Land Tax relief, a zero rate for employer NICs on new employees with earnings up to £50,270 per year. There will also be a 100% first year enhanced capital allowance relief for plant and machinery used within designated sites and an accelerated Enhanced Structures and Buildings Allowance relief of 20% per year. IR35 and off-payrolling also featured in the chancellor’s comments. There has been significant changes to the tax system over the last 20 years to try to address ‘disguised remuneration’. The details are not yet available on how this will be delivered. One key message is that genuinely self-employed workers will have less risk attached to their tax status by the new rules.”
For more information on what these changes mean for you, please don’t hesitate to get in touch!