Today the new Chancellor announced a Mini Budget 2022 to help with the cost of living crisis. Here are the main points that we know so far.
As always, more detail will be published in the future, so we don’t have everything yet.
This supercedes the Spring Budget announced in March 2022, and includes u-turns announced on 3rd and 14th October 2022
Energy costs:
For domestic households:
- £2,500 price cap already introduced for households, for a period of 2 years from October 2022.
- This should be a saving of £1,000 a year on previous energy increases.
- This is in addition to the £400 support for all households over the coming Winter.
- For households using alternative heating fuels (eg oil) there will be an additional payment of £100.
For businesses and other non-domestic energy users:
- There will be a 6 month scheme “the Energy Bill Relief Scheme” to protect businesses, charities and public sector organisations by providing discounts on wholesale gas and electric prices.
- This will be reviewed in March 2023.
- What else are the Government doing to help with energy costs?
- In the longer term the Government are looking at other strategies including:
- identifying the most vulnerable non-domestic customers and how to assist them.
- a new Energy Supply Taskforce to negotiate long-term agreements with major gas producers.
- a new pricing system, to better reflect the UK’s home grown cheaper and low-carbon energy sources.
- new legislation will be brought forward for energy suppliers to help customers to reduce their energy bills
Business tax changes:
Corporation tax increases reversed.
**update 14 October 2022 – this has been reversed**
- Company tax will stay at 19%, it was expected to rise to 25% in 2021.
- The Government’s aim is to focus on growth, and the cut in tax is meant to facilitate this growth in the short term, and a cycle of growth in the longer term.
Annual investment allowance remains at £1m
- This was a temporary measure to 31 March 2023, and was then set to reduce to £200k.
- This means that businesses can invest up to £1m in new plant and machinery (including commercial vehicles) and deduct the full amount from their profits before calculating tax.
National insurance rises reversed
- The previous Government had increased employers’ and employers’ national insurance contributions by 1.25%.
- This has now been reversed.
- So employees’ NIC will revert to 12%, and employers’ NIC will revert to 13.8%.
- They had each increased to 13.25% and 15.05% respectively.
Health and Social Care Levy reversed
This was introduced in the last budget at an additional 1.25%.
This will now be scrapped.
New Investment Zones announced
- 40 new investment zones will be created in the West Midlands, the Tees Valley and Somerset
- These investment zones will benefit from relaxed planning rules and reduced business taxes.
- No business rates for new occupancy.
- Enhanced capital allowances – full cost of qualifying plant and machinery can be deducted from business profits, before calculating tax, if used within the investment zone.
- No Employer NIC on salaries of a new employee working for at least 60% of their time within the investment zone.
- Stamp duty land tax won’t be due on land and buildings built or developed in the investment zone.
IR35 changes scrapped
- The previous Government’s IR35 reviews in 2017 and 2021 had made it much harder for contractors to offer their services via their own limited companies.
- They called this “off-payroll working” or IR35.
- This resulted in many directors closing their companies and going into employment.
- From 6 April 2023 these rules will be reversed, meaning contractors will be responsible for determining their own employment status.
- This will help contractors to win contracts, but will also benefit businesses looking for flexible workers, who they don’t have to employ.
- These changes have now been scrapped. More as we hear it.
Alcohol duty increases frozen
- Alcohol duty rates will be frozen from 1 February 2023, to give more support to the sector.
VAT free shopping
- The government are introducing a modern, digital VAT free shopping scheme.
- The aim is to boost the high street, and creating jobs in retail, hospitality and tourism.
- More news as we have it.
No changes to VAT rates
- We were hoping for a reduction in VAT to help hospitality and retail businesses, but no changes were announced today.
Personal tax changes:
Income tax will reduce to 19%
- Current basic rate income tax is 20%, and from April 2023 this will reduce to 19%.
Additional higher rate scrapped
**update: this was reversed 3 October 2022, and the 45% additional higher rate re-instated.
- The additional higher tax rate of 45%, for income over £150,000 in a tax year has been scrapped.
- This means that higher rate tax will be charged for income over £150,000, which is 40%.
Dividend tax increase of 1.25% reversed
- From April 2023 the previous Government had increased dividend tax by 1.25%, so basic rate dividend tax would be 8.75%, higher rate would be 33.75%.
- These rates will now revert to previous rates at 7.5% and 32.5% respectively.
Stamp duty threshold increasing
- No stamp duty on personal home purchases up to £250,000 (previously £125,000).
- First time buyers will benefit from not having to pay stamp duty on home purchases up to £425,000 (previously £300,000).
National insurance rises reversed
- The previous Government had increased employers’ and employers’ national insurance contributions by 1.25%.
- This has now been reversed.
- So employees’ NIC will revert to 12%, and employers’ NIC will revert to 13.8%.
- They had each increased to 13.25% and 15.05% respectively.
Cap on bankers’ bonuses reversed
- The current cap on bankers’ bonuses limits bonuses to certain bank staff to 100% of their fixed pay.
- The aim here is to support the growth of the UK economy.
There are a lot of changes to take into account today
As usual, the devil will be in the detail with today’s Mini Budget 2022, so as soon as we know more we will share.
Here is the Government’s Growth Plan published today, it is only 40 pages!
Where you are personally affected, and we already look after you, we will be in touch with any immediate changes.
If you’d like a chat about how any of the announcements affect you, please do get in touch with us.
