Kwasi Kwarteng's not so mini budget - Sep 2022
Following the appointment of the new UK Prime Minster, on Friday the government announced The Growth Plan but what are the main policy changes that may impact you and your business? Below we have highlighted the main aspects of the plan that we feel may have the biggest impact on your business and personal tax affairs.
Company Tax changes:
Corporation tax rate change:
Corporation tax rates which were due to increase from 19% to 25% in April 2023 will now remain at 19% for all companies, this means that for companies with a taxable annual profit of more then £250,000 there will no longer be an additional 6% tax due on profits. This means for a company with a taxable profit of £300,000 the additional tax that will no longer be due is approximately £18,000.
Example at 19%:
£300,000 taxable profits
£57,000 tax due at 19%
Example at 25%:
£300,000 taxable profits
£9,500 tax due at 19% on first £50,000 profits
£53,000 tax due at 26.5% (Marginal rate of tax) on profits between £50,001 and £250,000
£12,500 tax due at 25% on profits in excess of £250,000
£75,000 total tax due at higher rate of tax
Annual Investment Allowance
The Annual Investment Allowance (AIA) will continue to be set at £1 million permanently for all eligible UK companies, this means companies can continue to receive 100% tax relief on eligible assets in the year of purchase to the value of £1 million pounds.
Personal Tax changes:
Income tax rates:
The basic rate of tax which for the 2022/2023 tax year are those earning up to £50,270 will decrease from 20% to 19% from April 2023, this means (using the 2022/2023 bandings) that a person earning £30,000 will have a tax saving of approximately £174.30:
Example at 20%
£30,000 Annual salary
(£12,570) Less personal allowance
£17,430 Salary taxable at the basic rate of tax
£3,486.00 – Tax due at 20%
Example at 19%
£30,000 Annual salary
(£12,570) Less personal allowance
£17,430 Salary taxable at the basic rate of tax
£3,311.70 – Tax due at 19%
In addition to this the 45% additional higher rate of tax in place for those currently earning in excess of £150,000 per annum will be scrapped and there will be just a single higher tax rate of 40% for those currently earning in excess of £50,270.
National insurance rates:
The increase of 1.25% in national insurance that came in to effect from April 2022 will be reversed from 6th November 2022 bringing national insurance rates back to previous national insurance rates, this means (using the 2022/2023 bandings) that a person earning £30,000 will have an employee’s national insurance saving of approximately £217.80.
Example at 13.25%
£30,000 Annual salary
(£12,576) Less upper limit allowance
£17,424 Salary for NI at higher NI rate
£2,308.68 – NI due at 13.25%
Example at 12%
£30,000 Annual salary
(£12,576) Less upper limit allowance
£17,424 Salary for NI at lower NI rate
£2,090.88 – NI due at 12%
Stamp Duty Land tax:
Stamp Duty Land Tax for those purchasing a residential property is doubling from £125,000 to £250,000 meaning that for a lot of people no stamp duty land tax will be due on residential property purchases with the average house price in the Midlands (as per right move) being approximately £250,000. In addition to this in order to help first-time buyers get on the property ladder the level first-time buyers start paying stamp duty from is increasing from £300,000 to £425,000 along with additional access to a first time buyers relief for properties costing less then £625,000 compared to the current £500,000.
The government are predicting that these measures will reduce stamp duty bills across the board for all movers by up to £2,500 with first-time buyers able to access up to £8,750 in relief.
Other policy changes announced that maybe of interest:
Reforms to the Off-Payroll Working (OPW) rules introduced in the public sector in 2017 and extended to medium and large-sized organisations in the private and voluntary sectors in 2021 – with workers providing their services via an intermediary once again responsible for determining their employment status and paying the correct amount of tax and National Insurance contributions from 6 April 2023.
A freeze on Alcohol Duty rates from 1 February 2023, and further details of the government’s reforms to alcohol taxation.
Introduction of new investment zones around the UK where enhanced tax reliefs will be offered for Stamp Duty Land Tax (SDLT), Enhanced Capital Allowances, Structures and Buildings Allowance and Employer National Insurance contributions.
An expansion of the Seed Enterprise Investment Scheme (SEIS) to help more UK start-ups raise higher levels of finance – doubling the annual investor limit to £200,000, increasing the gross asset limit to £350,000 and making it easier for investors to claim tax reliefs, due to come into force from 6 April 2023.
Changes to the Company Share Option plan (CSOP) scheme – increasing the employee share option limit from £30,000 to £60,000 and removing a condition which limits the types of shares eligible for inclusion within the scheme, both due to take effect from 6 April 2023.
The cancellation of the planned increase in the rate of Diverted Profits Tax from 25% to 31% and the planned reduction in the Corporate Tax surcharge rate for banking companies, both of which had been due to take effect from 1 April 2023
We have a wealth of knowledge an experience in all of the above aspects if you require any advice or guidance on any of the changes please do not hesitate to contact the team at BSN.