What does the mini-Budget mean for me?

The Chancellor announced the mini-Budget – officially called the ‘Growth Plan 2022’ – on 23 September. With the cost of living rising, the Government announced a series of changes, including tax cuts. This blog outlines some key points from the budget and how these might affect you and your businesses.

Last updated 17 October 2022 in line with the updated Growth Plan.

Updates to the mini-Budget

This blog details the content of the mini-Budget as announced on 23 September 2022 by the then-Chancellor Kwasi Kwarteng.

On 17 October 2022, it was announced that the new Chancellor, Jeremy Hunt, was making changes to the mini-Budget and bringing forward measures from the Medium-Term Fiscal Plan. Specifically, the following changes have been announced:

  • corporation tax is set to rise from 19% to 25% in April 2023
  • the basic income tax rate will remain at 20%
  • the 45% additional rate of income tax will remain in place
  • the Energy Price Guarantee will remain in place until April 2023 and will then be reviewed
  • the planned IR35 reform will no longer go ahead, and the current IR35 rules will remain in place

Notably, the following mini-Budget changes will remain in place:

For more information, see the Government’s announcement.

Changes announced on 23 September 2022

Tax

Income tax and National Insurance

The cut to the basic income tax rate has been brought forward, from 2024 to 2023. This means that the current 20% tax rate, charged on taxable income between £12,571 and £50,270, will be reduced to 19% from April 2023.

The Chancellor has also pledged to cut the 45% additional rate of tax (paid by those who earn more than £150,000 per year) from April 2023. 

As Scotland has different income tax rates, these income tax rate changes will not apply in Scotland.

The 1.25% rise in National Insurance contributions (NICs), which took effect in April 2022, will be reversed from November 2022.

Stamp Duty Land Tax (SDLT)

Under the mini-Budget, the thresholds for SDLT, which is charged on property or land transactions in England or Northern Ireland over a certain price, have changed. 

The price at which SDLT is paid on residential properties has doubled from £125,000 to £250,000. As a result, SDLT rates now are as follows:

  • 0% for any portion of the price/value up to £250,000
  • 5% for any portion of the price/value between £250,001 and £925,000
  • 10% for any portion of the price/value between £925,001 and £1.5 million
  • 12% for any portion of the price/value above £1.5 million

The discount for first-time buyers has also been increased. Previously, discounted SDLT only applied to properties costing up to £500,000. This has now been increased to properties costing up to £625,000.

Corporation tax

The rate at which corporation tax is charged was planned to increase from 19% to 25% in April 2023. This planned raise has now been scrapped and corporation tax is expected to remain at 19%.

IR35

The off-payroll working (IR35) rules were introduced to tackle tax avoidance by workers (sometimes known as ‘consultants’ or ‘contractors’) who would otherwise be employees supplying their services to clients via an ‘intermediary’ (normally a company, known as a ‘PSC’). In April 2021, IR35 rules changed, requiring all public authorities and medium and large-sized clients (outside the public sector) to determine the actual employment status of a consultant.

As part of the mini-Budget, the Chancellor has pledged to simplify the current IR35 rules. It is expected that, from April 2023, those providing their services through a PSC will once again be responsible for determining their own employment status. More information is expected in due course.

For more information on the current IR35 process, read IR35 Status determination.

Energy costs

The Energy Price Guarantee

The Energy Price Guarantee – also referred to as the ‘energy cap’ – is set to reduce the unit cost of gas and electricity for private households in the UK. It is set to ensure that typical households will pay £2,500 a year on average on their energy bill. The Guarantee is expected to remain in place for 2 years from 1 October 2022.

The Guarantee is in addition to the Energy Bills Support Scheme, which provides a non-repayable £400 energy bill discount to eligible households from October 2022 to March 2023.

For more information, see the Government website.

The Energy Bill Relief Scheme

The Energy Bill Relief Scheme has been created to help businesses and other non-domestic customers with their energy bills. Eligible customers will be provided with a discount on their gas and electricity unit prices. The Scheme is expected to apply to energy usage between 1 October 2022 and 31 March 2023. For more information on eligibility, see the Government’s guidance.

For general information, see the Government’s Energy bills support factsheet.

What does this mean for businesses?

Anyone running a company (or another business liable for corporation tax) will benefit from the cancelled corporation tax raise. 

Businesses will also benefit under the Energy Bill Relief Scheme, with discounted energy prices.

Consultants and public authorities and medium and large-sized clients who engage consultants providing their services through a PSC need to be aware of the proposed IR35 changes. From April 2023, if you are a consultant providing your services through a PSC, you will likely need to determine your own employment status (not the party hiring you). However, until next April, the current IR35 rules continue to apply and businesses need to adhere to them. 

Shifting the status determination requirement from the business to the consultant means that the business hiring the consultant is not exposed to Pay As You Earn (PAYE) or NICS bills if the employment status assessment is incorrect. Instead, the consultant (or their PSC) will need to pay them.

Businesses and contractors should also review their contracts, especially any indemnities, to ensure they will be protected in the event of an employment status challenge.

What does this mean for private individuals?

For private individuals, the upcoming cuts to income tax and NICs will boost pay packets. 

Anyone looking to buy a home – especially first-time buyers – will benefit from the new SDLT rates and thresholds. Much like during the stamp duty holiday during the Coronavirus (COVID-19) pandemic, it is expected that the new SDLT thresholds will help stimulate the housing market.

With the energy cap taking effect next month energy bills are expected to reduce. On average, the Energy Price Guarantee is expected to save households £1,000 a year. This is in addition to the £400 Energy Bills Support Scheme, which will automatically be deducted from energy bills, and the most vulnerable households receive additional support.

 

If you would like to learn more, read the Government’s update and the full Growth Plan 2022. If you have any questions, do not hesitate to Ask a lawyer.

 

Rebecca Neumann
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