Although described as a ‘mini-Budget’, the Chancellor’s Statement on The Growth Plan 2022 earlier this morning introduced a wide range of measures. In addition to attempts to deal with rising energy prices, the Government set out a range of tax cutting and other incentive proposals with the key aim of stimulating economic growth. The main tax-related measures are noted below:
Income Tax and NIC
- The Basic Rate of Income Tax will be cut from 20% to 19% from April 2023.
- The temporary increase in NIC of 1.25% is to be cancelled effective from 6th November 2022. The 1.25% increase in dividend rates will be cancelled from April 2023. The Health and Social Care levy, which had been proposed for introduction in April 2023 has also been cancelled.
- The government will also abolish the Additional Rate of Income Tax such that, with effect from April 2023, there will be a single higher rate of Income Tax of 40 per cent, rather than an additional 45% on annual income above £150,000.
- There will no longer be an increase in the headline corporation tax rate to 25%, keeping the rate at 19% after 1st April 2023.
- The reduction in the level of Annual Investment Allowance is also cancelled, with the relief now available permanently on £1 million of qualifying expenditure on plant and machinery per year.
Stamp Duty Land Tax (SDLT)
- The government is reforming SDLT in England and Northern Ireland by doubling the level at which people begin paying this from £125,000 to £250,000 from today.
- There are also increases in reliefs offered to first time buyers- by increasing the level first-time buyers start paying SDLT from £300,000 to £425,000, and by allowing them to access the relief when they buy a property costing less than £625,000 rather than the current £500,000.
- With effect from April 2023 the government will repeal the off-payroll working (i.e. IR35) reforms introduced in 2017 and 2021. This will once again leave the primary responsibility for determining employment status (and also operating PAYE and NIC) with the personal service company, rather than with the client/ engager.
- Company Share Option Plan limit increased from £30k to £60K from April 2023
- The amount and availability of the Seed Enterprise Investment Scheme (SEIS) will be increased, with companies able to raise up to £250k of SEIS investment, increased from £150k.
- The government remains supportive of the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) and sees the value of extending them in the future.
- Businesses in designated “Investment Zones” will benefit from time-limited tax benefits in England, including enhanced capital allowances, structure and buildings allowances, business rates relief, Employers NIC relief and SDLT relief. The government intend to work with devolved administrations to develop similar opportunities in Northern Ireland, Scotland and Wales.
The measures outlined today went further than what had been trailed in the press over recent days and it obviously remains to be seen whether they will have the desired effect. However, it would be fair to say from the outset that the desire to simplify the IR35 rules will be welcomed, as these have been causing significant uncertainty for businesses in recent years.
If you have any queries on today’s announcements, please contact any member of our Tax team.