Mini-budget UK 2022

The New Chancellor Kwasi Kwarteng has now uncovered his mini budget with an emphasis on tax cut and to stimulate the UK economy. A summary of his key announcements is as follows:

Income Tax

  • A cut in the basic rate of income tax to 19% will be brought forward by a year, to be effective from April 2023. As it stands, basic tax rate is at 20% for any annual earning between £12,571to £50,270 in England, Wales, and Northern Ireland.
  • Government estimates approximately 31 million people will be benefiting from an average of £170 reduction in tax.
  • For England, Wales and Northern Ireland taxpayers who earn £150,000 a year, the 45% higher rate of income tax is to be abolished. This will mean that the 40% higher rate will be the top rate for earnings over £50,270 per annum.

National Insurance to raise pay packets

  • A reverse of the recent rise in National Insurance (NI) from 6 November 2022. This leads to:
    • an annual savings of £93 for people earning £20,000.
    • an annual savings of £218 for people earning £30,000.
    • an annual savings of £468 for people earning £50,000.
    • an annual savings of £843 for people earning £80,000.
    • an annual savings of £1,093 for people earning £100,000.
  • The New Health and Social Care Levy to pay for the NHS will not be introduced.

Corporation Tax

  • The corporation tax rise which was due to increase from 19% to 25% in April 2023 will be scrapped. Cancellation of this tax along with the scrapping of national insurance rise will cost the Treasury £3bn a year.

Benefits

  • Rules around Universal Credit tightened, by reducing benefits if people don’t fulfil job search commitments.
  • Mr Kwarteng said that it is likely that 120,000 people on Universal Credit to “take active steps to seek more and better-paid work, or face having their benefits reduced”.
  • Extra support for jobseekers aged over 50 to help get them into work, such as extra time with work coaches.

Work and investment

  • IR35 rules – the rules which govern off-payroll working – to be simplified.
  • Annual investment allowance, the amount companies can invest tax free, remains at £1m indefinitely.
  • Regulations change so pensions funds can increase UK investments.
  • New and start-up companies able to raise up to £250,000 under scheme giving tax relief to investors.
  • Share options for employees doubled from £30,000 to £60,000.

Stamp duty

  • Cut to stamp duty which is paid when people buy a property in England and Northern Ireland where no stamp duty on first £250,000 and for first time buyers that rises to £425,000 – comes into operation today.
  • 200,000 more people will be taken out of paying stamp duty altogether, government claims.
  • The maximum value of a property on which first-time buyers’ relief can be claimed will also increase to £625,000 from £500,000.

Energy bills

  • Liz Truss previously announced that the energy price cap will be frozen at £2,500 per year for 2 years from October.
  • Freeze on energy bills, which the government claims will reduce inflation by 5 percentage points
  • Total cost for the energy package expected to be around £60bn for the six months from October

Bankers’ bonuses

  • Rules which limit bankers’ bonuses scrapped as part of wider moves to deregulate the City.
  • Package of regulatory reforms to be set out later in the autumn

Shopping

  • VAT-free shopping for overseas visitors.
  • Planned increases in the duties on beer, for cider, for wine, and for spirits cancelled.

Infrastructure and investment zones

  • Government in discussion regarding the setting up of investment zones with 38 local areas in England.
  • Tax cuts and liberalised planning rules to be offered to release land for housing and commercial use.
  • Investment zones offered measures such as no business rates and stamp duty waived.
  • New legislation to cut planning rules, get rid of EU regulations and environmental assessments in an effort to escalate building.

VAT

  • Vat could be cut from 20% to 15% across the board.
  • A temporary reduction in the rate of VAT applied to hospitality and leisure may also be announced, as well as cutting VAT from energy bills.

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