Here is a brief summary of today’s “Fiscal Event” delivered by the Chancellor.
Business Support and Growth
The Chancellor has stated that growth is not as high as it should be and “This has made it harder to pay for public services requiring taxes to rise, in turn higher taxes on capital and higher taxes on labour, have lowered returns on investment and work, reducing economic incentives and hampering growth still further,”
There will be up to 40 new investment zones created in areas such as Somerset, Tees Valley and the West Midlands. These zones will benefit from relaxed planning rules, reduced business taxes (no business rates to pay), An employers National Insurance contribution reduction on any new employees paid up to £50,000 as well as accelerated tax reliefs for buildings and structures and 100% tax relief on investments in plant and machinery and no Stamp Duty Land Tax on purchases of land and buildings for commercial or new residential developments.
The basic rate of income tax will be cut to 19% in April 2023.. This brings forward Rishi Sunak’s pledge to reduce it to 19% in 2024 –
The planned corporation tax rise to 25% in April 2023 has been scrapped . Corporation Tax will remain at the current 19% indefinitely. The Chancellor stated that low business taxes encourage investment
Stamp Duty Land Tax
No stamp duty will be paid on the first £250,000 of a residential property; raising the threshold from £125,000.
For first-time buyers the nil rate threshold will be £425,00, up from £300,000 and the level at which the 5% rate for those purchases rises from £500,000 to £625,000
The IR35 reforms brought in 2017 and 2020 which place the burden of liability on businesses instead of off-payroll contractors will be repealed from April 6, 2023
The Annual Investment Allowance which was raised temporarily from £200,000 to £1,000,000 and which was due to go back down next year, will now stay at £1,000,000 indefinitely, bringing more certainty to businesses and encouraging them to invest further in plant and machinery.
With no specific detail today, the chancellor announced that the investment level figure will rise to allow investors to provide seed capital to new and recently formed businesses meeting its criteria. The 2025 “sunset” for EIS and SEIS has been delayed.
Cap on Bankers’ Bonuses
As expected the Chancellor has scrapped the cap on bankers’ bonuses as “higher base pay pushing up banks’ fixed costs makes the UK less attractive than the US or Asia.”
It is worth noting that the cap in the EU is twice the bankers’ annual salary
Duty rates for beer, cider, wine, and spirits
The planned increases in the duty rates for beer, for cider, for wine, and for spirits will all be cancelled.
The Rabbit Out Of The Hat
A notable decision to scrap the additional rate of income tax has come out of the blue. The highest rate of income tax is currently 45% and paid by those with income over £150,000. From April 2023 there will only be a single higher rate of 40% paid on income over £50,271 and 32.5% for dividends over that threshold.
Other notable statements in today’s mini-Budget
The government will introduce VAT free shopping for tourists. This brings back the policy of tax free shopping for international visitors that was scrapped in January 2021.
Office Of Tax Simplification
In what was another surprise statement by the Chancellor today, the Office of Tax Simplification will be abolished in order to “boost economic growth and simplify the tax system
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