September 2022 Mini Budget - U Turn

2 months, 1 week ago by Oliver Atkinson

Three weeks after the infamous ‘Mini-Budget’ we have had a new chancellor appointed and much of the plans originally announced cut. Jeremy Hunt, the new chancellor, has reversed £32 billion of tax cuts and has warned that there could be further cuts to find more savings to balance the UK’s books. Experts suggest that there is still a hole of up to £40 billion which will need to be covered.

Income Tax:

• The most controversial plan originally announced was to abolish the additional rate of tax, this meant that individual earnings over £150,000 per year would be taxed at 40% rather than 45%.
• The plans to cut the basic rate of income tax from 20% to 19% for income between £12,571 to £50,270 has also been cut. It was estimated that the tax cut would have saved 31 million people and average of £170 per year.

Corporation Tax:

The plan to increase corporation tax to 25%, rather than being slashed to 19% will go ahead. The 19% rate will continue to apply to companies with profits of not more than £50,000, with marginal relief for profits of up to £250,000 as originally planned. A corporation tax rate of 25% will still be lower compared to other G7 countries such as Canada, Japan, and Germany.

Dividends:

The chancellor announced that the 1.25% tax increase on dividends, to coincide with a rise in National Insurance contributions, was not going to be reversed. This means individuals with dividends over the £2,000 annual allowance will continue to pay the increased rates of 8.75%, 33.75% and 39.35% tax on dividends. The tax rate depends on whether they are basic, higher or additional rate taxpayers.

However, some aspects of the mini budget have survived, the most notable parts are the following:

National Insurance:

The rise in both employer and employee national insurance contributions that began in April 2022 will be reversed starting from the 6th of November. Both rates were increased by 1.25%, but from the 6th of November will return to their previous rates of 13.25% for employees and 13.8% for employers.

Stamp Duty

The threshold at which property buyers pay stamp duty will rise from £125,000 to £250,000 from the 23rd of September 2022. Further, first time buyers will benefit from an extended nil rate on properties up to a value of £435,000.

The new rates are as follows:

IR35

Starting in April 2023, the current IR35 legislation is set to be repealed, and workers providing their services via an intermediary will
once again become responsible for determining their employment status.

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