Mini Budget 2022 - Main tax announcements

This blog discusses some of the key tax changes announced in last week's Autumn Statement.

The new Chancellor, Kwasi Kwarteng, delivered his first Autumn Statement last Friday. Described officially as the Growth Plan 2022 and unofficially as a 'mini' or 'emergency' Budget, there is nothing small about the degree of debate generated by the announcement.

The focus of the announcement was investment and incentivisation. The new administration had unashamedly trailed the package as being designed to turbo-charge the UK economy. The government's stated intention is to hit an economic growth target of 2.5% per annum.. 

The main business and personal tax announcements made by the new Chancellor last week are summarised below. After a run of (arguably) anti-climactic budget announcements this most recent event certainly included some eye-catching measures.

Tax cuts

• It came as no surprise that the main rate of corporation tax, which was due to increase to 25% from April 2023¹, will instead remain at 19%.
• The planned changes to the rates of the banking company surcharge, and the diverted profits tax, are also being cancelled (as such planned changes were consequential to the planned increased corporation tax rate)
• Also as expected, the recent rise in national insurance contributions (NIC) rates (both employee and employer, by 1.25%) will be reversed from 6 November 2022. As a result the planned new "health and safety" levy due to take effect from April 2023, to replace the 1.25% NIC increase, has been shelved
• One of the most striking, and widely unexpected, measures was the announcement of the abolition of the 45% top rate of income tax, from April 2023
• The new, reduced, basic rate of income tax (at 19%) will take effect earlier than planned (April 2023)
• The planned increase from April 2023 (by 1.25%) in the dividend tax rate has been reversed

Off-payroll working rules

In a move that took many (if not all) by surprise, the Chancellor announced the reversal of significant recent changes to the off-payroll working tax rules. The off-payroll working rules, like the so-called 'IR35' tax rules from which they emerged, were designed to counter tax avoidance whereby individual consultants are engaged via intermediaries (such as a personal services company or PSC). 

These to-be abolished rules, which took affect in 2017 for the public sector and in 2021 for private sector companies (save for the smallest businesses) placed the burden of determining a worker's tax status, when engaging via a PSC or other intermediary, on the so-called end client. The end-client also has to account for any tax and NICs due as a result of a finding of 'deemed' employment.

The rules will be reversed from April 2023.

This is likely to be a welcome change for many, as it takes us back to the 'old' IR35 rules. Engagers of workers via PSCs will face a reduced compliance burden and the onus of deciding whether there is a deemed employment (and any resulting liability for tax and NICs) will revert to the PSC.

Stamp duty land tax (SDLT) on residential property (England and Northern Ireland only)

With immediate effect (from 23 September 2022):

• The threshold at which SDLT becomes payable has increased from £125,000 to £250,000 (for existing home-owners)
• The SDLT nil-rate threshold for first-time buyers:
  • has increased from £300,000 to £425,000; an
  • is available for residential properties costing less than £625,000 (previously £500,000)

Investment Zones

It was announced that the government intends to establish 'investment zones' carrying tax benefits over 10 years that will include:

•  an SDLT exemption for land bought for commercial or for new residential purposes
• no employer NICs on earnings (up to £50,270 p.a.) for each new employee working at least 60% of their time in the zone
• 100% first year capital allowances for qualifying plant and machinery expenditure
• 100% relief from business rates on newly-occupied business premises

No timescale for introducing these investment zones has been provided, at the time of writing.

Tax simplification

In another measure not widely anticipated, the Office for Tax Simplification is to be abolished, after 12 years of mixed results. The stated intention is for tax simplification to be "embedded" into the institutions of government. 

Other measures

• The 'temporary' annual investment allowance (AIA) of £1m for qualifying plant and machinery expenditure has been made permanent (it was due to revert to £200,000 in April 2023). The AIA provides for 100% tax relief by way of capital allowances.
  
  
• From April 2023, in a bid to improve the attraction of a specific form of tax-advantaged employee share option plan (CSOPs) the maximum value of options that can be granted will be increased from £30,000 to £60,000. CSOPs are often of interest to companies that are looking to incentivise employees through grant of options but which do not qualify for enterprise management incentive (EMI) purposes. This change is helpful in that regard.
  
  
• From April 2023, the seed enterprise investment scheme (SEIS) investment limit will be increased to £250,000 and the SEIS gross asset limit will be increased to £350,000.
  
  
• On VAT-free shopping, the government "will introduce a modern, digital, VAT-free shopping scheme, with the aim of providing a boost to the high street and creating jobs in the retail and tourism sectors." A consultation will follow.

¹For companies with annual profits in excess of £50,000.