The Growth Plan 2022 “mini-Budget”
FINAL UPDATE: Shortly after assuming the role of Prime Minister following the resignation of Liz Truss, Rishi Sunak announced that the previously announced ‘Medium-Term Fiscal Plan’ set for 31 October 2022 would be upgraded to a full Autumn Statement that will take place on 17 November 2022. We will publish a new article with an update with details of the new announcements and the position regarding the those from the previous “mini-Budget” shortly following the Autumn Statement.
UPDATE 3: On 17 October, Jeremy Hunt announced further reversals of tax cuts, following the “mini-budget.” The most significant include the reduction in the basic rate of income tax from 20% to 19%, which has now been indefinitely cancelled, and this also includes the reduction in the dividend tax rates (which will remain at 8.75%, 33.75% and 39.35%). The reduction in National Insurance Contributions is expected to go ahead as planned. Other polices no longer going ahead include the VAT free shopping for foreign visitors, reform of IR35 measures and alcohol duties. Finally, a Treasury-led review of energy support after April 2023 has been launched.
UPDATE 2: A further policy reversal was announced on 14 October and the increase of the corporation tax rate to 25%, with effect from 1 April 2023, will now go ahead, as had been the case prior to the “mini-Budget” announcements.
UPDATE: Following the “mini-Budget” announcements there has been significant economic concerns, public opinion backlash and criticism from various authorities. As a consequence, the Chancellor announced on Monday 3 October that the proposals to scrap the 45% additional rate of income tax would be reversed, commenting that the plan “had become a distraction”.
So far the Government has resisted calls for further policy changes, but the situation appears to remain fluid.
ORIGINAL SUMMARY: On 23 September 2022, following the appointment of the new Prime Minister and Cabinet Ministers, the Chancellor of the Exchequer delivered his Growth Plan (widely trailed as a “mini-Budget”), announcing a series of tax and related measures intended to “release the huge potential in the British economy”. A number of significant tax cuts are the headline announcements:
- The 1.25% increase in the National Insurance Contributions will be reversed with effect from 6 November 2022 and the Health and Social Care Levy that was intended to supersede this has been cancelled.
- The basic rate of income tax will be cut from 20% to 19% from 6 April 2023. The 45% additional rate will be repealed from the same date, leaving a single higher rate of 40% (the additional rate for dividends will similarly be repealed).
- The increase in the corporation tax rate to 25%, due to take effect from 1 April 2023, has been cancelled.
- The annual investment allowance will no longer fall to £200,000 and instead will remain at £1 million indefinitely.
- The nil band for Stamp Duty Land tax will be doubled from £125,000 to £250,000, while the nil band for first-time buyers is similarly extended from £300,000 to £425,000 (on properties valued at up to £625,000).
Further measures announced include:
- Schemes intended to encourage entrepreneurship will be extended and enhanced. In particular, the Enterprise Investment Scheme and Venture Capital Trusts will be extended beyond 2025, and limits will be increased for the Seed Enterprise Investment Scheme and Company Share Option Plans.
- The cap on bankers’ bonuses will be lifted.
- The “IR35” rules for off-payroll working will be repealed, with individual workers to assess their own status with effect from 6 April 2023.
- Alcohol duties will be reformed, with the planned increases for beer, cider, wine, spirits cancelled.
- VAT-free shopping for foreign visitors will be introduced.
The Office for Tax Simplification is to be wound down, with plans instead to “embed simplification in the heart of Government”.
Further detail will inevitably become available as today’s announcements are reviewed over the coming days. Your usual DSG contact will always be happy to discuss the impact of these and any other such development on you and your business.