The Mini - Budget - Where are we now?
It has been a rather eventful few weeks for the government and the economy!At the time of writing, Rishi Sunak and Jeremy Hunt are at the helm, attempting to navigate the ship to calmer waters.The financial markets appear to be responding positively to the change in power, undoing some of the chaos caused by their predecessors, Liz Truss and Kwasi Kwarteng.
Before losing office, Kwarteng u-turned on the abolition of the 45% tax rate and then Hunt quickly reversed almost all of his other measures set out in the Mini-Budget.
Let’s consider the remaining measures and what they mean for you and your business in the short term:
Individuals
- Reversing the 1.25% increase in National Insurance Contributions (NIC) for employees, employers and the self employed from November 2022. This will save approximately £470 per year for an employee with earnings of £50,000.
- Increasing the Stamp Duty Land Tax (SDLT) nil-rate threshold for residential property to £250,000 immediately, creating a saving of up to £2,500.Greater savings are available for First Time Buyers where the nil-rate threshold has been increased to £425,000 and now properties with a value of up to £625,000 are eligible for relief.A First Time Buyer will now only incur SDLT of £3,750 on the purchase of a £500,000 property, delivering a saving of £6,250.
- Reversing the 1.25% increase in National Insurance Contributions for Employers will reduce the cost of employing staff for many businesses.A business employing 3 staff on £30,000 each per year will save approximately £785 per year.
- Reinstating the planned increase in the Corporation Tax rate to 25% for companies with profits of £250,000 or more. Companies with profits at or below £50,000 will continue to suffer tax at 19%. There will be a taper rate on profits between £50,000 and £250,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate. A company with profits of £100,000 could pay Corporation Tax of £22,750 under the proposals, up from £19,000 under the current regime.
- Permanently setting the Annual Investment Allowance (AIA) at £1m, meaning it will not drop to £200,000 from April 2023 as previously planned.A very welcome announcement, avoiding the headache of carefully timing machinery expenditure when the AIA limit changes and particularly beneficial for those farming businesses with a substantial annual machinery spend.
Businesses
We now await the Autumn Statement, currently set for 17 November, where further tax changes could be made.Detailed plans of how government debt will be reduced and medium term growth plans for the economy are expected which will hopefully provide further reassurance to the financial markets and stabilise the aftershocks of what are now acknowledged as policy mistakes back in September.
Victoria Paley ACA CTA
Senior Tax Manager
Victoria joined the practice in July 2019 having worked in accountancy and tax in the rural sector since 2010. As a Chartered Accountant and Chartered Tax Adviser Victoria spends most of her time advising family farming businesses on Capital Gains Tax and Inheritance Tax matters primarily in relation to succession planning and capital transactions.
Outside of work Victoria spends most of her time running around after her two young children and riding her horse. Having always loved to travel, Victoria hopes to resume exploring the world with her family once the children are a little older!