Mini Budget 9/22 Update

Courtesy of Nick Dott, McDaid and Partners:

The Mini-Budget comes after the Bank of England voted for a 0.5 percentage points increase in the interest rate, meaning it now stands at 2.25% (the highest level since December 2008) and represents the seventh rise since last December.

Here, we summarise all the key details from today’s statement, which included the biggest package of tax cuts since 1972, and the information also revealed prior to the address which may impact you and your business.

Corporation Tax

It was announced in the March 2021 Budget that there would be a 6% increase in the Corporate Tax main rate from 19% to 25%. However, in a move that the new Prime Minister has said is key to helping attract investment into the UK, this has been abandoned.

Energy

Ahead of the Budget, Business Secretary Jacob Rees-Mogg announced a new Energy Bill Relief Scheme. The support package will provide a discount on wholesale gas and electricity prices for all non-domestic customers whose current energy bill has been significantly inflated. The support is equivalent to the Energy Price Guarantee put in place for households. As with the Energy Price Guarantee for households, customers do not need to take action or apply to the scheme to access the support. Support (in the form of a p/kWh discount) will automatically be applied to bills.

National Insurance

As with the corporation tax rate, it was expected that a reversal of the National Insurance (NI) hike would be confirmed, and this was the case the day prior to the Mini-Budget.

Annual Investment Allowance

The Annual Investment Allowance (AIA) for qualifying expenditure on plant and machinery, which was originally increased to £1,000,000 in the 2018 Budget, and was due to revert to £200,000 from 1 April 2023, will instead be permanently set at £1,000,000.

IR35

From April 2023 the IR35 rules introduced for the public sector in 2017 and the private sector in 2021 will be repealed, meaning that end users of contractors engaged through the contractor’s personal service company will no longer be responsible for assessing whether the contractor should be taxed as an employee by the end user. This will revert to being the responsibility of the personal service company providing the contractor.

Income Tax

From April 2023 in England, there will be a single higher rate of 40% on Income Tax. This means the additional rate level will be scrapped. Also, a year earlier than planned, the basic rate will be cut to 19% from next year. We have yet to see confirmation if Scotland will apply this also but early indicators from Nicola Sturgeon seem that this would be unlikely.

Stamp Duty Land Tax

Up until Friday last week, there was no Stamp Duty Land Tax (SDLT) payable on the first £125,000 of a property’s value in England and Northern Ireland. This level has been doubled to £250,000 with effect from 23 September.

First time buyers currently do not pay SDLT on the first £300,000, but this will increase to £425,000 and the level at which they can claim relief rises to £625,000 from £500,000.

It remains to be seen whether Scotland’s Land and Buildings Transaction Tax (LBTT) and Wales’ Land Transaction Tax (LTT) will follow similar lines.

Energy

As announced a couple of weeks back, the Government is to cap household energy bills at £2,500 for two years from 1 October 2022. This cap is said to equate to an average household saving of £1,000 a year.