Emergency Mini-Budget 2022 – Key Highlights
This morning (Friday 23rd September), Chancellor Kwarteng unveiled his ambitious new “Growth Plan” to tackle inflation, support businesses, and help households. He’s aiming for a 2.5% trend of growth, and key highlights are:
- Corporation Tax remains at 19%, with the planned rise cancelled
- Basic rate Income Tax will be cut to 19% in April 2023 – a year earlier than anticipated, which will give 31 million people £170 more per year on average
- Stamp Duty Land Tax cuts will help the property market, and 200,000 buyers will be lifted from paying the tax at all
Continue reading to discover more about Friday’s announcement – and contact us today for further advice.
Stamp Duty Land Tax Changes
A package of major cuts to Stamp Duty Land Tax has been announced, which should increase residential investment, boost household good spending, and support jobs in the property industry:
- Nil rate band will double from £125,000 to £250,000
- 200,000+ individuals will be able to buy a home without paying Stamp Duty
- A standard buyer moving into a semi-detached house will save £2,500
- First time buyers will pay no Stamp Duty up to £425,000
- And relief can be claimed on increased property value – up from £500,000 to £625,000
The Chancellor will further support homebuyers by using surplus government land to build new homes.
Corporation Tax Rise Cancelled – and more
To allow businesses to invest more, boost productivity, and provide new jobs, the Chancellor has:
- Cancelled the planned rise in Corporation Tax, which remains at 19%
- Reversed the 1.25% rise in National Insurance contributions – which should save 920,000 businesses around £10,000 next year
- Kept the Annual Investment Allowance at £1 million – as opposed to returning to £200,000 March next year – giving 100% tax relief on plant and machinery investments up to the higher £1 million limit
Basic Rate Income Tax Cut
To help people keep more of what they earn, Kwarteng announced a 1p cut to basic rate Income Tax – a year earlier than planned. From April 2023, Income Tax will be cut to 19% – resulting in 31 million people having around £170 more per year. If you combine the reversal of HSCL and Income Tax reduction, a full-time worker on the National Living Wage will see a tax cut of £100+.
Additional Rate Tax to be Abolished
From April 2023, the additional rate of tax will be abolished, and replaced by a single higher rate Income Tax of 40% – designed to attract talent to the UK workforce, and drive business growth.
IR35 Reform to be Repealed
From April 2023, the IR35 reform will be repealed – which means UK workers providing their services via an intermediary (e.g. personal service company) will again be responsible for determining their employment status, and paying the right amount of tax and NICs.
Dividend Tax Rates to Fall
Dividend tax rates will decrease to 7.5% for basic-rate taxpayers, 32.5% for higher-rate taxpayers, and 38.1% for additional rate taxpayers.
Tackling Energy Costs
Kwarteng has declared the Energy Price Guarantee to tackle high costs of energy – driven by rising inflation from Putin’s invasion of Ukraine – which will save the average household £1,000 per year.
The Energy Bill Relief Scheme will also offer discounts on wholesale gas and electricity for businesses, which should halve their energy bills, and reduce peak inflation by 5%.
Alcohol Duty Frozen
There will be targeted support for pubs and hospitality by freezing alcohol duty for another year. An additional consultation on modernising alcohol duties is to be expected in due course.
Bank Levy
The cap on bankers’ bonuses has been removed.
Investment Zones for Growth
The government is in discussion with areas such as Tees Valley, South Yorkshire, and West of England to set up specific Investment Zones. These zones should encourage new communities – where there will be tax cuts and liberalised planning rules, to encourage investment in areas of shopping, eating, housing and office-space.
Plans to Accelerate Infrastructure
There are plans for new legislation to accelerate new roads, rail, and energy infrastructure. By removing restrictions, building roads will be quicker, and deployment of offshore wind farms will be sooner – in line with environmental assessments.
New Measures to Unlock Private Investment
As additional support for companies, the Government will adjust regulations to increase pension fund investment into UK assets. This will benefit savers, drive economic growth, and motivate investment into the UK’s science and technology businesses.
People on Low Incomes to Secure More Work
People on low incomes will be encouraged to secure more and better paid work:
- 120,000 more people expected to come into intensive work search regime – claimants of Universal Credit (earning less than 15 hours per week of National Living Wage) to have regular meetings with their Work Coach to manage steps to increase earnings, or face reduced benefits
- Jobseekers aged 50+ to have extra time with Work Coaches so they can go back to the job market – a return to pre-pandemic rates in this age group could boost GDP by 0.5%-1%
Scotland, Wales, and Northern Ireland
Today’s announcements are mainly UK-wide, but the Scottish Government should receive £600 million+ of additional funding, and the Welsh Government £70 million+. The Health and Social Care Levy reversal should save 4.3 million people across Scotland, Wales, and Northern Ireland more than £230 on average.
Next Steps
The Government is expected to set out further plans over the coming weeks to:
- Accelerate digital infrastructure
- Make changes to business regulation
- Boost housing supply
- Improve immigration system
- Reduce costs of childcare
- Improve farming productivity
- Support our financial services
How Will the Changes Impact You?
If you’re concerned as to how tax reforms from the Mini-Budget may affect you, our friendly team is here to help. Get in touch through our contact form, call 01743 562430, or email hello@mercianaccountants.co.uk today.
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