By David Watkinson – WatkinsonBlack
THEY say that a week is a long time in politics. As I write this it is just over 3 weeks since Liz Truss and her then Chancellor delivered their mini budget, and the provisions contained therein were the subject of last months article.
This month we will amend that article to reflect what has happened to the various measures 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. This is one of the two major changes that, as we write, have been retained and will go ahead as from this month. However, the equivalent cancellation of the increase in dividend tax has been cancelled, meaning that this increase for the current tax year from the previous 7% to 8.25% will take effect.
Secondly, the reduction in the Standard Rate of Income Tax from 20% to 19%, originally planned for April 2024, was to be brought forward to 6th April 2023. Not only has this accelerated timeframe been cancelled, but the reduction in the basic rate has been cancelled for the foreseeable future.
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, would be scrapped from April 2023. This planned reduction has been scrapped, meaning that those high earners will not make the average £10,000 saving on income tax.
Fourthly, the previously announced increase in the Rate of Corporation Tax to 25% in 2023 has to have been scrapped, the rate remaining at its current level of 19%. This reversal of policy has now been reversed, and Corporation Tax will increase to 25% next April as originally planned.
Fifthly, the Chancellor announced a reduction in Stamp Duty on Property Purchases, the full details being included in last months article. This is the second of the major changes announced three weeks ago that has been retained.
Sixthly, the planned increase next February in duty rates on beer, wine, cider and spirits was to have been cancelled. This planned increase will now go ahead, resulting in the price of a pint of beer increasing by 7p a pint, and a bottle of spirits 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. This easing in regulation has been retained.
At the same time there was to be a Crackdown on Working Benefit Claimants, and this crackdown has been retained. 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.
We understand that “Investment Zones”, which will enjoy the substantial tax advantages spelled out last month, will continue, and in fact applications have now closed. However, many of the councils that have applied have since expressed doubts about whether they will see the light of day.
Finally, some lucky news, for us at least! Last month we failed to mention the planned changes to the IR35 legislation that were included and intended to ease the burden on contractors and those companies who make use of them. Lucky for us because, unsurprisingly, that easing in the legislative burden has now been cancelled.
STOP PRESS: In this fast moving situation we have learned in the last few minutes (written 18th Oct) that Liz Truss is “moving away” from the “commitment to the Pension Triple Lock” that she confirmed two weeks ago. PHEW – WATCH THIS SPACE!!
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