When it was announced that Kwasi Kwarteng was delivering a mini budget, never would we have expected so many tax cuts in the space of 20 minutes!
What updates from the mini budget will affect businesses?
So, what were the key announcements and what do they mean for you? You can read the full detail here, or if you are time poor, why not check out our simple summary in bullet point format.
Corporation tax is remaining the same, and the 130% super deduction will cease in March 2023 – so timing of purchases may be key!
- Corporation tax is remaining at 19% rather than increasing to 25% in April 2023.
- The £1million annual investment allowance will now permanently be £1m. So, businesses can invest in plant and machinery and assets, then deduct the full cost in the year of purchase (not all assets qualify so always best to chat it through with us).
- The super-deduction will still cease on 31st March 2023, until this date businesses can get up to 130% of the cost of investment – so timing of big purchases may be key.
Personal Tax and National Insurance
NIC increase is being cancelled from November 2021, but dividends, basic rate tax and additional rate reductions will not apply until April 2023.
- The 1.25% increase in National Insurance will be reversed from 6th November 2022. This applies to both employees and employers’ contributions, so both you and your employees will save money.
- Dividend tax will reduce by 1.25% from April 2023. So, the increase will remain for the rest of 2022/23, basic rate dividends are taxed at 8.75% and higher rate (once your earnings exceed £50,270) at 33.75%. From April 2023 this will fall back to 7.5% and 32.5% respectively. Higher rate taxpayers may want to plan the timing of dividends.
- Basic rate of income tax is to be reduced to 19% from April 2023 – this is on earnings between £12,570 and £50,270. An employee earning £50,000 will save £374 per year.
- The 45% additional rate on earnings over £150k will be completely removed from April 2023. An employee earning £200k per annum will save £2,500 per year in tax.
Energy Bill Relief Scheme
Government support for business energy bills.
- This is similar to the domestic scheme, but with differing rates which can be found here.
IR35 Reforms to be Repealed
The onus is back onto the company who provides the service i.e., the contractor.
- As a reminder, IR35 are the rules that workers/contractors operating through their own limited company, must pay the same Tax and NI as employees. In April 2021 HMRC shifted the responsibility of determining a worker’s status from the contractor to the client. As a result, large corporations took a blanket approach, and most contractors were forced onto the payroll.
Whilst most contractors under IR35 were IT contractors, there was a large proportion of Lorry Drivers that were impacted, and this added to the perfect storm that was the driver shortage at the beginning of last year.
From April 2023, it is back down to the individual to determine their status. This is a much-welcomed change for a lot of our clients, but please note that IR35 has not been abolished, only the change in who is responsible for determining the employment status of workers.
- Increase in limits to the Seed Enterprise Investment Scheme and Company Share Option Plan.
- Increase to stamp duty thresholds.
- New investment zones with tax reliefs – Staffordshire and West Midlands are two counties that are being consulted with.
If you have any questions on how any of these changes impact you, please get in touch.