From income tax to stamp duty and national insurance, Kwasi Kwarteng’s first announcement as chancellor proved to be far from the ‘mini’ budget that had been expected. Clayton & Brewill provides an overview of the mini budget 2022 and what it means for businesses.
UPDATE 17th October 2022: please read our update to this article following Kwasi Kwarteng’s resignation and the appointment of Jeremy Hunt as Chancellor here.
Having only been chancellor for a matter of days, Kwasi Kwarteng delivered his budget this morning (23 September), which included a sweeping package of measures designed to shake-up the UK’s fiscal landscape. Here are some of the key measures announced in the mini budget 2022:
Tackling the energy crisis
From October, the Energy Price Guarantee will limit the price customers can be charged for energy. This means the typical household will now likely pay £2,500 for their annual energy use.
The chancellor also revealed the Energy Bill Relief Scheme, which will help to cut energy prices for businesses, charities and public sector organisations. The scheme will run for 6 months and cover energy used from 1 October 2022 to 31 March 2023.
The total cost of the energy package, including business support, over next six months is estimated at £60bn, with the chancellor stating that is it “entirely appropriate for the government to use our borrowing powers to fund temporary measures to support families and businesses.”
Measures for businesses
Corporation tax – The planned Corporation Tax increase to 25% has been cancelled; the rate will now stay at 19% in a bid to support business investment.
Annual investment allowance – This will be permanently set at £1 million from 1 April 2023, which will be its highest ever level to date. The allowance gives 100% tax relief to businesses on their plant and machinery investments up to the level of £1 million.
Seed Enterprise Investment Scheme (SEIS) – The chancellor announced plans to widen the criteria of the SEIS, including allowing firms to now raise £250,000 under the scheme – 66% more funding than previously.
The Company Share Option Plan (CSOP) – The CSOP limit allows businesses to offer employees share options worth up to £30,000. It has now doubled to £60,000, with the aim of encouraging employers to offer more shares to their employees.
IR35 off-payroll working rules – The government will scrap the 2017 and 2021 reforms to the IR35 off-payroll working rules, with the chancellor stating: “Reforms to off payroll working have added unnecessary complexity and cost for many businesses.”
Personal measures
Income Tax – The basic rate of income tax will fall from 20% to 19% on income between £12,571 and £50,270. [Update] The chancellor initially abolished the additional rate of income tax (45% on income over £150,000) completely in his mini budget delivered on 23 September, however the government has since abandoned this plan (as of 3 October) following a mounting criticism of the policy and a turbulent reaction from markets.
National Insurance – From 6th November, the government is also cutting National Insurance by 1.25 percentage points and cancelling the Health & Social Care Levy.
Stamp Duty Land Tax (SDLT) – The nil-rate band has doubled for all buyers up from £125,000 to £250,000. First time buyers will now only pay SDLT on homes over £425,000, up from £300,00. First time buyers’ relief is available on properties up to £625,000, up from £300,000.
Alcohol duty will be frozen from February 2023, saving the consumer 7p on a pint of beer, 4p on a pint of cider, 38p on a bottle of wine, and £1.35 on a bottle of spirits.
Other measures
Bankers’ bonuses – The EU-inspired cap on bankers’ bonuses is to be scrapped as part of efforts to “reaffirm” the UK’s status as a financial services hub. The chancellor stated: “All the bonus cap did was to push up the basic salary to bankers or drive activity outside Europe.”
VAT-free shopping scheme – The government will introduce a digital, VAT-free shopping scheme for international tourists. This is designed to support high streets, shopping centres and airports and create more jobs in the retail and tourism sectors.
