The new Chancellor, Kwasi Kwarteng, has unveiled what he claims are the biggest tax cuts in a generation.
Much of the Chancellor’s “Plan for Growth” had been expected as he confirmed he is scrapping a planned rise in corporation tax, reversing the National Insurance increase, cancelling the Social Care Levy, and lifting the cap on bankers’ bonuses.
The major rabbit out of the hat was the announcement that the Chancellor is to abolish the additional rate of income tax (45%) to take effect from April 2023.
Below we have summarised the announcements from this morning’s mini-budget:
Corporation Tax
The planned rise in corporation tax from 19% to 25% from April 2023 has been cancelled.
The Annual Investment Allowance tax relief for businesses investing in plant and technology will remain at £1m permanently, rather than returning back to £200,000 in March 2023.
National Insurance
The rise in national insurance to 13.25% from April 2022 is to be reversed from the earliest opportunity (6th November 2022). The planned introduction of the Health and Social Care Levy to pay for the NHS from April 2023 will not be introduced.
This will save on average £330 a year for the taxpayer.
Income Tax
The cut in the basic rate of tax from 20% to 19% has been brought forward 12 months to April 2023. This means that 31 million people will be better off by an average of £170 a year.
The 45% higher rate of income tax has been abolished. Leaving one single higher rate of income tax of 40% from April 2023.
Stamp Duty
The zero rate of stamp duty has been increased from £125,000 to £250,000, this comes into operation from today, the government claims this will result in 200,000 people being taken out of paying stamp duty altogether.
First-time buyers’ rate of stamp duty has been increased to £425,000. Relief has also been increased from £500,000 to £625,000.
Bankers’ bonuses
The rules which limited bankers’ bonuses have been scrapped.
Energy
The Government’s energy bills support package will cost about £60bn over the next 6 months.
Household bills are to be cut by an expected £1,000 this year with aid from the energy price guarantee and a £400 grant. Millions of the most vulnerable households will receive additional payments, taking their total savings to £2,200 this year.
Independent forecasters expect the government’s energy plan will reduce peak inflation by around five percentage points.
Shopping
Tourists visiting the UK from overseas will be able to benefit from VAT-free shopping.
The planned increases in duty rates for beer, cider, wine and spirits have been cancelled.
Investment Zones
The Chancellor has promised up to 40 low-tax investment zones across the UK to “unleash the power of the private sector”.
The investment zones will introduce liberalised planning and tax regimes, with a freeze on rates for businesses moving onto the sites, and no National Insurance on the first £50,000 a new employee earns. Stamp duty will also be abolished on the purchase of land.
Planning Restrictions
The Chancellor said that the government is committed to accelerating the delivery of major infrastructure projects across the country to drive economic growth. He said “Today, our planning system for major infrastructure is too slow and fragmented. The time it takes to get consent for nationally significant projects is getting slower, not quicker, while our international competitors forge ahead. We have to end this.”
New legislation will be brought forward to speed up the delivery of infrastructure. This includes:
- Reducing the burden of environmental assessments
- Reducing bureaucracy in the consultation process
- Reforming habitats and species regulations
- Increasing flexibility to make changes to a Development Consent Order once it has been submitted.
The Chancellor also said that to “increase housing supply and enable forthcoming planning reforms, we will also increase the disposal of surplus government land to build new homes. We are getting out of the way to get Britain building”.
EIS, SEIS and VCT schemes
The SEIS investor limit has been doubled to £200,000, while the EIS and VCT schemes have been extended past 2025.
