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The focus of the mini-Budget presented by Chancellor Kwasi Kwarteng was, above all else, on growth. But, in a practical sense, it was all about taxes: rolling back anticipated rises, cutting spending in other areas, and keeping favourable allowances. The rollback of the increases in national tax contributions and corporate taxes was anticipated, but the reversal of the 45p extra income tax rate was a bit of a surprise. Tax reforms were the driving force behind this ambition for rapid expansion. Everything about the Growth Plan is in the name; it allegedly mentions attempting to increase growth. However, the government has concluded that the tax system requires some significant reforms to accomplish that goal.
The following is a list of all of the significant tax policies that were included in the mini-Budget:
Stamp duty and land tax
A reduction in the stamp duty land tax, also known as SDLT, will be implemented with the intention of boosting investment in residential property and consumer spending on household goods, thereby indirectly creating more opportunities for employment in property-related industries such as construction, interior decorating, and removal services.
This will be accomplished by doubling the zero rate band to £250,000. First-time buyers will pay no SDLT up to £425,000 and can obtain relief on houses up to £625,000. These reductions will only take place in Great Britain and Northern Ireland. It is not yet clear what actions the devolved nations will take, so stay tuned for further information.
Capital allowances and corporation tax
The anticipated increase in corporate tax (CT) to 25% has been scrapped; therefore, it will stay at 19%. The planned 31% increase in diverted profits tax will not happen. To maintain the existing six percentage point gap between it and the primary CT rate, it will be kept at 25%.
The bank corporate tax surcharge will stay at 8% instead of falling to 3%, but the allowance will increase from £25m to £100m to stimulate growth.
The annual investment allowance (AIA) will remain at £1m instead of falling to £200,000, bringing businesses some certainty following six changes in the last 14 years. However, there was no notification about the 130% super deduction; thus, it will likely end in April 2023, as announced.
Investment zones
England’s newly established investment zones will benefit locations within 38 of the country’s local authorities. These will provide businesses with limited-duration tax breaks and more options for long-term strategic planning. While only England has regions that potentially benefit from these new investment zone reliefs, the government is working with Scotland, Wales, and Northern Ireland to give them as well.
Investment schemes
The Chancellor announced forth a variety of investment-friendly policies. For instance, the Seed Enterprise Investment Scheme (SEIS) will become accessible to a broader range of companies beginning in April 2023. The maximum value of gross assets that can be owned will increase from £250,000 to £350,000, representing an increase of two-thirds. At this point, the age of the company’s trade can be no more than two years old. The duration of this will increase to three years. The yearly investment limit will increase to £200,000 from its current level.
CSOP limit doubles from £30,000 to £60,000. The condition that share classes must be “worth possessing” will be loosened to bring it into line with the Enterprise Management Incentive Scheme. The government has said that the Enterprise Investment Scheme (EIS) and the Venture Capital Trusts (VCT) are worthwhile programmes that should be allowed to continue beyond 2025.
VAT-free shopping
VAT-free shopping in the United Kingdom ceased in 2020 when the country exited the European Union. At this time, you can only get it in Northern Ireland. However, the Chancellor announced that this would be restored as a reimbursement scheme for tourists from countries other than the United Kingdom who visit Great Britain. This can be applied to items purchased on the high street, at airports, or any other point of departure and then taken abroad in personal luggage. This new scheme will operate digitally.
Off-payroll working
The reversal of modifications to off-payroll working rules implemented for the public sector in 2017 and the private sector in 2021 was another significant surprise included in the mini-Budget. These rules adjustments were brought in for the first time. This does not do away with IR35 but instead brings us back to the rules that were in place in the year 2000.
Alcohol duty
The government’s response to the alcohol duty consultation conducted the previous autumn has been made public. It has suggested amendments that would determine the tax on alcoholic drinks dependent on the volume of alcohol contained in the beverage. The implementation of these changes is scheduled to begin in August of 2023. In addition, small Brewers Relief will be renamed Small Producer Relief to include wines, spirits, ciders, and low-alcohol beers. To further aid the hospitality industry, the Chancellor has also announced that all duty rates would be frozen beginning on February 1, 2023.
Income tax
The big news was that the extra tax rate of 45%, which was brought in place after the financial crisis, was going away. In the future, those who previously paid a higher rate will pay 40%. In addition, the standard income tax rate cut to 19 percent was brought ahead from its originally scheduled date of April 2023.
NIC and tax on dividends
National insurance contributions will drop 1.25 percentage points in November. Additionally, the health and social care levy, scheduled to go into effect beginning in April 2023, has been scrapped. From April 2023 forward, the government will no longer impose a dividend tax rate increase of 1.25 percentage points. The dividends tax rate for those who pay the additional tax is also being eliminated.
End of the OTS
The announcement that the Office for Tax Simplification (OTS) will be disbanded after 12 years surprised many people. HM Treasury and HMRC will be employed with a clear mandate to simplify the tax law.