I listened eagerly to the new Chancellor, Kwasi Kwarteng’s statement who I thought spoke well during his 30 minute speech. Was this a Mini Budget?? WOW….. This “Mini Budget” had more amendments to tax than I ever recall from a full budget in the past. This contained tax cuts for every tax payer and I am sure many will welcome the savings for either themselves or their business.
My concern however, is how are we as a country going to pay for all this when combined with the energy support package which is forecast to cost £60 billion in the first 6 months? It feels like this is a big gamble resting on our ability to achieve sustained growth in the economy of 2.5% per annum. Looking at the markets, it does not feel like they consider the tax savings to be a sensible option with sterling dropping to a low of $1.03 to £1 while I am writing this article.
The Office for Budget Responsibility was already forecasting that we would spend £83 billion in 2022-23 on interest before these tax cuts. My hope is that the gamble does pay off, but if it does not, I am concerned we will have to suffer much higher taxes in the future as a result of today’s announcement.
There were several announcements to whet the appetite of individuals this morning which I consider below:
- Removal of the 1.25% National Insurance rise with effect from 6 November 2022 and the cancellation of the 1.25% planned social security levy from 6 April 2023.
- Removal of the 1.25% increase to dividend taxation from 6 April 2023.
- Additional rate income tax rate of 45% for earners over £150,000 has been scrapped from 6 April 2023.
- Basic rate tax will reduce to 19% from 20% in April 2023, 1 year ahead of target.
- From today a permanent increase in stamp duty thresholds so no stamp duty is payable on the first £250,000 for property purchases.
- Planned increase in alcohol duty has been cancelled.
There were a flurry of announcements that effect businesses including many of my clients and are considered below:
- The planned increase of Corporation Tax from 19% to 25% has been scrapped from April 2023.
- The removal of the National Insurance rise mentioned above also saves costs for employers.
- Annual Investment Allowance will remain at £1million permanently to encourage businesses to invest in equipment.
- VAT free shopping for overseas shoppers to support the tourism industry.
- Removal of the 2017 and 2021 IR35 reform from April 2023. This puts the onus back on the tax payer to correctly determine their tax status when providing their services through a personal service company. In addition, the Chancellor confirmed that the IR35 rules were unnecessarily complicated and they would be reviewed. I am sure there are many individuals who have been forced into an employment tax position when they want to be self-employed and this announcement will be welcomed by them all.
- Investments zones to be setup which will help “level up” the country. These zones will have attractive accelerated tax savings such as no business rates, reduced stamp duty, no employers NIC on an employee’s first £50,000 of salary and incentives surrounding plant and machinery investment.
So on the face of it, good for everyone in the short term, unless you are about to buy some dollars to go on holiday…
I leave you with a final thought. The Chancellor talked about having lowest unemployment and driving investment in the UK to create growth – and yet nearly everyone I speak to talks about recruitment being a significant difficulty so where are the “skilled” employees coming from?
If you have any questions regarding the 2022 “Mini Budget” then please call your local Lambert Chapman contact on 01376 326266.
Sean Wiegand – Partner