On 23 September 2022, the UK Chancellor Kwasi Kwarteng announced The Growth Plan 2022 policy paper, a “new Growth Plan with the biggest package of tax cuts in generations”.
The mini-Budget, as it is commonly known, aims to address the rising cost of living for both people and businesses. In this article, we list the key points for businesses, including changes to tax, capital investment, payroll and employment.
Income Tax reductions
- Basic rate income tax reduced to 19% (from 20%) from April 2023.
- Basic rate tax in England, Wales and Northern Ireland is paid on any annual earnings between £12,571 to £50,270 - rates in Scotland are different.
National Insurance reductions
- Reversal of the recent rise in National Insurance as of 6 November 2022. Effectively, rates revert to the 2021/22 levels.
- Workers and employers have paid an extra 1.25p in the pound since April 2022.
- The New Health and Social Care Levy to pay for the NHS will not be introduced.
Corporation Tax rise cancelled
- The UK-wide rise in corporation tax which was due to increase from 19% to 25% in April 2023 has been cancelled.
- From April 2023, the existing 19% main rate will continue to apply to all businesses, regardless of profits.
- Rules which limit bankers' bonuses have been scrapped.
IR35 (off-payroll) determination reversal
- The off-payroll status determination rules (IR35) are to be simplified as of April 2023.
- The repeal of the legislation will scrap the off-payroll reforms “avoiding unnecessary complexity for business”. Contractors themselves will be relied upon to determine their status. IR35 will remain but how it is enforced is changing.
- The Annual Investment Allowance (AIA), the amount companies can invest tax-free, will remain at £1m indefinitely.
- The AIA is a form of capital allowance that allows organisations to offset the cost of certain plant and machinery investments against their tax bill.
- AIA is available in addition to the standard capital allowance main and special rate pools.
- Regulations will change so that pension funds can increase UK investments.
- New and start-up companies are able to raise up to £250,000 under the Seed Enterprise Investment Scheme (SEIS) giving tax relief to investors.
- Share options for employees doubled from £30,000 to £60,000.
Stamp duty cut
- Stamp duty land tax (SDLT), which is paid when investors buy a residential property in England and Northern Ireland, will be cut.
- No stamp duty on first £250,000 (up from £125K). For first-time buyers, that rises to £425,000 – effective immediately.
- 200,000 more people will be taken out of paying stamp duty altogether says the government.
- The Overseas Surcharge which applies at 2% to the purchase of residential property by overseas investors remains unchanged as does the 3% surcharge that applies in all cases in respect of the purchase of Additional Dwellings.
Investment zones created across the UK
Up to 38 local authorities across the UK may soon have investment zones within them.
Start-up businesses willing to have their premises within these zones may receive:
- 100% relief on business rates on newly occupied or expanded business premises.
- 100% enhanced capital allowance relief for plant and machinery for the first year.
- Zero-rate Class 1 employer NICs on salaries for new employees who are paid up to £50,270.
- No stamp duty on land bought for commercial or residential development.
- Enhanced Structures and Buildings Allowance relief of 20% per year.
EU laws removed
- The retained EU Law (Revocation and Reform) Bill has been published.
If it is passed into law, it will automatically repeal any retained EU law meaning that, unless any of those laws are specifically retained, they will expire on 31 December 2023.
Limits on industrial action
- The introduction of minimum service levels by law to reduce strike actions in industries like the rail sector.
- New laws requiring all trade unions to put pay offers from employers to a members’ vote to be introduced.
Energy support for businesses
- The Energy Bill Relief Scheme, starting on 1 October 2022, will give discounted gas and electricity unit prices for those on non-domestic contracts for six months. The mini-Budget outlined how it will be funded.
It has also been reported that the prime minister plans to raise the number of workers allowed to enter the UK. Reports claim the government will lift the cap on seasonal agricultural workers and broadband engineers, and make other changes to the shortage occupations list, which will allow key sectors to recruit more overseas staff. The Chancellor confirmed that “The home secretary would be making an update on immigration policy … she will be making that in the next few weeks.”
How 3CS can help
For legal help and advice relating to any of the above, please get in touch with your usual 3CS contact.