On 23 September 2022, the Government produced the ‘Mini-Budget’ as a plan for growth; yet, just over three weeks later, virtually all the tax measures announced have been reversed by the new Chancellor.
What is staying from the Mini-Budget?
The reduction in National Insurance (NI) from 6 November 2022 is to go ahead, reversing the increase that was implemented earlier in the year. This is probably because the legislation to reduce the rate has already been passed.
The increase in the nil rate band to £250,000 in respect of Stamp Duty Land Tax also remains, again likely because actual property completions have already taken place.
Mini Budget U-turns
Income Tax
The reduction in the top headline rate of Income Tax, from 45% to 40%, has been reversed, as has the plan to cut the basic rate of Income Tax from 20% to 19% from 6 April 2023.
This change to the reduce the basic rate had been brought forward from a proposed date of 6 April 2024, yet it would appear that even 2024 is unlikely to happen, as Mr Hunt referred to sticking at 20% ‘indefinitely’.
Corporation Tax
The Corporation Tax increase announced by the previous administration and then cancelled by the former Chancellor Kwasi Kwarteng will now take place in April 2023.
The rate of Corporation Tax from 1 April 2023 will be as follows:
- First £50,000 of profits 19%
- Next £200,000 of profit 26.5%
- On the rest 25%
IR35
The cancellation of the IR35 (off-payroll working) 2017 and 2021 reforms for contractors working through Personal Service Companies (PSCs) is also not happening. So, it is ‘as you were’ for the companies affected.
Dividend Tax
The previously announced reduction to the rate of dividend tax, to apply from 6 April 2023, has been cancelled. Originally dividend tax was raised to reflect the NI increase. It had, therefore, seemed reasonable that if NI was to be reduced, then so should dividend tax, but this is not happening.
The rates of dividend tax are for:
- Basic Rate taxpayers 8.75%
- Higher Rate taxpayers 33.75%
- Additional Rate taxpayers 39.35%
Energy costs
Universal support for energy costs, which had been announced as lasting for a period of two years, will now only be in place until 31 March 2023. The Treasury will work on plans for after this date.
GH Comment
Barry Jefferd, Tax Partner, comments: “One of the canons of a successful tax system is certainty (fairness and ease of collection are two others).
How a Government can announce measures, and then reverse virtually all of them just 3 weeks later is incredible.
In my 30 years as the Tax Partner at George Hay, I have never seen anything so haphazard and dysfunctional.
In the last three weeks, I have advised clients on incorporation, and group reorganisations based on the announced IR35 reforms. I am now having to re-advise. How can this be sensible or cost-effective for anybody?
It has been suggested that next year we produce our tax tables in pencil and send out erasers with them, so they can be updated as necessary! This is not a way to run a tax system.”
How can George Hay help?
To discuss what the latest announcements mean for you or your business, contact our team of chartered accountants, tax, and business advisers, in Cambridgeshire, Bedfordshire and Hertfordshire.
*This summary was written on 17 October 2022, and we have done our best to ensure that information is accurate at time of writing. We will continue to monitor developments relating to the Chancellor’s announcements and report on these accordingly.
