Mini Budget Tax Cuts Reversed by New Chancellor
On Thursday, 17th October, the new chancellor brought forward many measures from the Medium-Term Fiscal Plan, reversing almost all tax cuts from Kwarteng’s Mini Budget. The only big measures to survive were Stamp Duty Land Tax (SDLT) changes and the decrease in National Insurance due on 6th November.
Continue reading for a summary of the latest changes – and contact us today for further advice.
What changes were cancelled or amended?
Income Tax to stay at 20%.
The basic rate of Income Tax won’t be reduced to 19% ahead of 2024; it will stay at 20% indefinitely. And the Additional rate of Income Tax won’t be abolished; it will remain at 45%.
Dividend Tax won’t fall.
Dividend tax rates will no longer fall – the current rates of dividend tax (which increased by 1.25% in April 2022) are here to stay.
Corporation Tax set to rise.
Corporation Tax will not remain at 19% for all companies – it is set to rise in April 2023, dependent on the company’s profits:
- Profits of £250,000 or more: tax will rise to 25%
- Profits between £50,000 and £250,000: there will be marginal relief, and tax will increase incrementally until it reaches 25%, giving a marginal rate of 26.5%
- Profits of £50,000 or less: classed as the lower profits limit, the tax will remain at 19%
For companies with accounting periods shorter than one year, the upper and lower profits limits will be reduced accordingly. There will also be reductions to the limits for companies within groups or with associated companies.
Energy Price Guarantee to shorten.
The Energy Price Guarantee for households will remain in effect until April 2023, not for two years as originally planned. There will also be a review of the Energy Bill Relief Scheme for businesses before April next year – with the view to make support more targeted and the measure less costly.
IR35 reforms won’t be repealed.
UK workers providing services via an intermediary will not determine their employment status from April 2023 – it remains for employers to determine whether or not a contractor should be taxed like an employee.
Alcohol Duty won’t be frozen.
There won’t be a freeze in Alcohol Duty rates from February 2023 as planned.
What changes survived?
National Insurance increase still reversed.
The proposed 1.25% rise in National insurance contributions from November, and the Social Care Levy from April 2023, both remain cancelled.
SDLT changes remain.
The package of Stamp Duty Land Tax changes is still in place and won’t be cancelled:
- The 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
- First-time buyers can claim relief on increased property value – up from £500,000 to £625,000
Annual Investment Allowance stays at £1 million
Tax relief on plant and machinery is being kept at £1 million, as opposed to returning to £200,000 in March 2023.
Investment schemes to continue
Business investment will continue to be supported by the Seed Enterprise Investment Scheme and the Company Share Options Plan.
How will the changes affect you?
The chancellor’s recent changes could have significant tax implications for you – if you have any questions, our friendly team is here to assist. You can send us a message through our contact form, call 01743 562430, or email hello@mercianaccountants.co.uk today.
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