Mini Budget – September 2022
The Chancellor Kwasi Kwarteng has announced some eyebrow-raising tax changes in the mini Budget delivered on 23 September 2022. Headlines are the decrease in the rate of corporation tax, the abolition of the top rate of income tax and the reversal of an increase to national insurance contributions. It remains to be seen whether these sweeping tax cuts will have the desired effect of stimulating investment by minimise the tax and compliance burden on businesses and individuals (and further tax cuts in the near future cannot be ruled out).
Set out below is a summary of the key tax take-aways:
- Corporation Tax: Planned corporation tax increase to 25% from April 2023 will be cancelled, so corporation tax rate to remain at 19%.
- Stamp Duty Land Tax (SDLT) to be reduced as follows:
- Effective from 23rd September 2022, the nil rate band for SDLT on residential property purchases has been doubled from £125,000 to £250,000; and
- For first time buyers
- the threshold at which SDLT becomes payable on a first home increases from £300,000 to £425,000; and
- the value of a property on which relief for first time buyers is available is now £625,000 (up from £500,000)
3. Income tax:
- Additional rate of 45p in the pound (for those earning over £150,000) is to be abolished from April 2023; and
- Basic rate of income tax (for those earning over £50,270) is now down to 19p in the pound (down from 20p) – this has been brought forward from April 2024
4. Capital Allowances: Annual Investment Allowance (AIA) to be permanently set at £1m. This is a reversal of the planned reduction in the AIA limit to £200,000, which would have applied from 1 April 2023. The AIA enables businesses to claim a 100% deduction on the cost of capital expenditure on qualifying plant and machinery against their taxable income.
5. Off-payroll working rules (IR35): the recent changes to the off-payroll working rules (in force since April 2021) has now been reversed. This means that where a contractor provides their services through an intermediary such as a personal service company (PSC), the contractor now has responsibility for determining the employment status of the contractor and, if appropriate, paying income tax and national insurance contributions. This will apply for engagements in both the public and the private sector.
6. National Insurance contributions (NICs): recent increase in NICs from April 2022 (by 1.25p in the pound) will be reversed from 6 November 2022. The increase in dividend rates (of the same amount) will be reversed in April 2023 (and the separate Health and Social Care Levy will be abolished).
7. Enterprise Investment Scheme (EIS): tax efficient scheme for venture capital investment will now extend beyond the previous 'sunset' of April 2025 (previously the scheme was to end as a result of historic European Union rules on state aid).
8. Seed Enterprise Investment Scheme (SEIS): From April 2023
- the amount which companies who qualify for this scheme may raise will rise from £150,000 to £250,000;
- the gross assets limit for a company will increase from £200,000 to £250,000 (meaning more earlier stage companies can qualify);
- the age of a company which can qualify for SEIS will be raised from two years to three years; and
- the limit on what an individual may invest in an SEIS-qualifying company will be increased from £100,000 to £200,000
Company Share Option Plan (CSOP): from April 2023, the limit on the value of shares under option which an employee may hold at any one time will double from £30,000 to £60,000. In addition, in order to align CSOPs more with tax-efficient EMI Options, certain restrictions on the class of shares over which CSOP options can be granted will be lifted.