By David Watkinson
THE Chancellor has today announced a major U-Turn in government policy in the largest mini-budget since 1972. As well as the substantial universal help being given to individuals and businesses the Chancellor has now announced substantial cuts in taxation and national insurance. So what is included?
Firstly, the increase in National Insurance Rates from 12% to 13.25% which took effect on 6th July will be reversed from 6th November. Similarly, the increases in National Insurance paid by employers and by the self-employed will also be reversed. This will benefit anyone earning over about £1,000 per month from employment or self-employment, but will not benefit anyone whose income is primarily pension or investment income. Savings at various salary levels are:
- £30 per annum on salaries of £15,000
- £218 per annum on salaries of £30,000
- £468 per annum on salaries of £50,000
Secondly, the reduction in the Standard Rate of Income Tax from 20% to 19%, originally planned for April 2024, will be brought forward to 6th April 2023. This will benefit anyone whose income is above the Personal Allowance, which has been frozen at £12,570 for the past two years. The average saving was estimated by the Chancellor to be £170 in a full year.
Thirdly, whilst the Higher Rate of Income Tax remains at 40%, the Chancellor announced that the Additional Rate of Income Tax, which is currently 45% on taxable income over £150,000, will be scrapped from April 2023 resulting in a cut in income tax of 5 percentage points for an estimated 660,000 higher earners who will save an average of £10,000 in a full year.
Fourthly, the previously announced increase in the Rate of Corporation Tax to 25% in 2023 has been scrapped, the rate now remaining at its current level of 19%.
Fifthly, the Chancellor announced a reduction in Stamp Duty on Property Purchases. From today:
- The Nil rate band is increased by £125,000 from £125,000 to £250,000.
- First time buyers enjoy a larger Nil rate band. Previously, they enjoyed a Nil rate band of £300,000 provided the cost of the property did not exceed £500,000. From today, these are also increased by £125,000, meaning that they will have a Nil rate band of £425,000 provided that the cost of the property does not include £625,000.
Sixthly, the planned increase next February in duty rates on beer, wine, cider and spirits has been cancelled. Had this gone ahead the price of a pint of beer would have increased by 7p a pint, and a bottle of spirits would have increased by £1.35.
The above are the main provisions affecting the average “man in the street”. There are, however, a number of other announcements.
The most publicised change is that the current limit on bankers bonuses will be scrapped. Following the financial crash in 2008, bankers bonuses were limited to double their annual salary (lucky bankers). They are now even luckier, as their bonuses will once more be unlimited.
At the same time there will be a Crackdown on Working Benefit Claimants. Currently. If you are on Universal Credit then you need to “actively seek” work. However, a “light touch” is currently applied to this requirement once you work for 9 hours a week on the National Minimum Wage. This will increase to 12 hours a week immediately, and to 15 hours a week from next January, resulting in potentially more benefits being sanctioned.
The Chancellor has also announced that talks have begun with 38 areas of the country to set up “Investment Zones” which will enjoy substantial tax advantages including:
- No Employers National Insurance on the first £50,000 of salaries paid to new employees
- No Stamp Duty on Land Purchases for new Commercial and Residential developments
- Accelerated Tax Relief on qualifying plant and buildings
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