If you live in the UK, you will be very aware of the current economic and political situation that we’re currently being faced with.
The announcement on the 6th of September of the new Prime Minister and Chancellor of the Exchequer’s appointment, Liz Truss and Kwasi Kwarteng respectively signalled the start of a new beginning. It was then expected that a budgetary update would follow.
This was delayed towards the middle of October due to the sudden passing of Her Majesty the Queen, and the National Period of Mourning.
On the 23rd of September, the Mini-Budget was announced, with some drastic and far-reaching changes to taxation, see our blog on this here.
Many of the changes were reversing the current and upcoming changes as detailed by the then Chancellor Rishi Sunak as part of his Spring Statement of 2021, to move the UK economy forward following the global Covid-19 pandemic.
Immediately after the announcement of this October 2022 mini-budget, the global markets reacted adversely to this, and so, as swiftly as the changes were announced, on the 3rd of October a reversal of the decision to remove the 45% tax rate was re-instated.
On the 14th of October, things got a little more interesting and frustrating/ infuriating.
The media were very quick to announce the sacking of the Chancellor of the Exchequer Kwasi Kwarteng, following a meeting between him and the Prime Minister, swiftly followed by the additional announcement:
- The planned hike to Corporation Tax rates from 19% to 25% on profits over £50,000, which had been revoked in the September 2022 mini budget, was back in the plan from April 2022
- The new announcement of Jeremy hunt as the new Chancellor.
Earlier today, the 17th of October 2022, Mr Hunt released an update following his very recent appointment, with a view to try to stabilise the national economy following the events of the Mini Budget.
- Reduced support with energy bills, so rather than an energy cap of 2 years, this will be in place for only 6 months, to cover winter, with a review planned in April 2023.
- A new approach is planned with this, so that only those with lower incomes would be supported in the future, rather than the current blanket support.
- The planned income tax rate cut from 20% to 19% has been revoked, so there will be no planned changes for the foreseeable future. (it was planned to be reduced from April 2023)
- Confirmation that the 45% tax rate will still stand, rather than it being removed from April 2023.
- Tax on dividends planned to be increased from April 2023, recently reversed, is still now going ahead. This impacts many small business owners, who usually take their earnings from their owner-managed businesses in a mix of low salaries and the remainder in dividends. The increase is 1.25% on top of the current rates of 7.5, 32.5 and 38.1%, making them 8.25, 33.75 and 39.35% from April 2023.
- Increases in fuel duty and alcohol duties will now go ahead, rather than being cancelled.
- Anyone on the major benefits, such as Universal Credit, should expect a rise in what they receive, but this will not come in until April 2023.
- IR35 reforms – the major news recently, there were plans to repeal the proposed changes to the rules for off-payroll working, which were introduced in 2017 and 2021, however, these regulations, which have been controversial and criticised by some businesses will now continue.
Mini Budget measures scrapped and retained
- Corporation Tax – Cancelling rise from 19% to 25% – SCRAPPED
- Income Tax – Removal of 45% top rate for high earners – SCRAPPED
- income Tax – Cutting basic rate by 1p to 19p – SCRAPPED
- Alcohol Duty – Freezing rates – SCRAPPED
- VAT – Tax-rate shopping for non-UK visitors – SCRAPPED
- National Insurance – Reversing 1.25% rise – RETAINED
- Stamp Duty – No duty of first £250,000 of properties value – RETAINED
- First-time buyers – no duty on first £425,000 of property’s value – RETAINED
