Chancellor of the Exchequer, Kwasi Kwarteng, delivered his mini-budget to The House of Commons on the 23rd of September 2022. Continue reading to discover the key announcements made during Friday’s mini-budget.
The Mini-Budget
Chancellor Kwasi Kwarteng delivered his mini-budget on the 23rd of September 2022, unveiling measures that aim to drive UK economic growth. The Chancellor, who took the position less than three weeks ago, confirmed that many of the tax cuts promised by prime minister Liz Truss during the Conservative Party leadership race would be enacted.
The fiscal event resulted from high inflation, one of the sharpest falls in real wages on record and consumer prices expected to near 11% when energy bills rise in October. Here, we summarise the key announcements. To read the complete Growth Plan, please visit the government’s website.
IR35 reforms repealed
In a welcome announcement for the temporary workforce sector, Chancellor Kwasi Kwarteng unveiled plans to repeal off-payroll working rules from April 2023. From April 2023, workers who provide their services to an end client in the public and private sector will once again be responsible for conducting their employment status assessment and ensuring they are paying the correct amount of tax and National Insurance (NI).
Additional Income Tax Rate abolished and banker bonus cap scrapped
In a surprise move, Kwasi Kwarteng announced that the additional income tax rate would be abolished. From the 6th of April 2023, those living in England, Wales and Northern Ireland will no longer pay 45% on annual income exceeding £150,000. Instead, any income above £50,270 will be taxed at 40%.
Kwarteng announced he would be scrapping the cap on bankers’ bonuses as he argued that “a strong economy has always depended on a strong financial sector.” The bonus was previously limited to 100% of a banker’s salary but could be doubled to 200%, subject to shareholder approval.
Stamp Duty Cut
The Stamp Duty Cut doubles the threshold from which Stamp Duty Land Tax is due on purchasing residential properties from £125,000 to £250,000. The threshold at which first-time buyers must pay Stamp Duty has also increased from £300,000 to £425,000. The maximum value of a property on which first-time buyers’ relief can also be applied has increased from £500,000 to £625,000.
National Insurance increase reversed
On Thursday the 22nd of September, Kwarteng announced that April’s 1.25% NI increase would be reversed. The 1.25% increase was part of previous Chancellor Rishi Sunak’s plan to fund the NHS and social care in the UK. It was due to last for one year, after which a new 1.25% Health & Social Care Levy would be collected. From the 6th of November 2022, the 1.25% increase to NI will be reversed, and the Health & Social Care Levy will be scrapped.
Dividend increase reversed
The Chancellor announced that April’s dividend tax increase of 1.25% will be reversed. From the 6th of April 2023, the dividend tax rate will revert to 7.5% for basic-rate taxpayers and 32.5% for higher-rate taxpayers. Additional-rate dividend tax will also be scrapped to align with removing the additional rate of income tax.
Basic rate of Income Tax lowered
The planned reduction in the basic rate of Income Tax for those living in England, Wales and Northern Ireland will occur sooner than expected. Kwarteng confirmed that the rate, due to be lowered from 20% to 19% from April 2024, will now take effect a year earlier in April 2023. This will bring a tax saving of around £124 a year for someone on a £25,000 salary, or £374 a year for someone on £50,000.
Corporation Tax frozen
In a welcome announcement for businesses, Kwarteng revealed the planned increase for corporation tax would no longer go ahead. Instead, it will remain at 19%.
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