It's a U-Turn for Tax

On Monday 17 October, the NEW Chancellor of the Exchequer, Jeremy Hunt, announced that he will be revsersing some of the recently announced plans from the latest Mini Budget. We share what he’ll be striking through.

The last ‘fiscal event’ mini-budget introduced measures with the intent to drive economic growth by backing businesses and helping households, but a massive u-turn was taken shortly after. We could we-write the text but it makes more sense to just strike-through what is no longer relevant from our last blog.

Here are our 10 Key Points

The most easy to comprehend is the reduction to the basic rate income tax rate from 20% to 19% with effect from April 2023. It was originally initiated by the last Chancellor to come into effect from April 2024, so it is no real surprise, it has just been brought forward a year. The basic rate of income tax will in fact remain at 20%
The Social Care Levy that was due to come in from April 2023 has been scrapped and there has been no change for NI and pension purposes. This was effectively a type of tax/NI contribution (by another name) costing the taxpayer a further 1.25% on relevant earnings.
The temporary 1-year increase of 1.25% in Class 1, 1A/B, and Class 4 National Insurance rates effective from April 2022 will still be stopped from 6 November 2022. However, the new dividend tax rate, which was increased by 1.25% will remain and will no longer be scrapped.
The additional rate of income tax at 45% will be abolished from April 2023. The additional tax rate of 38.1% (that was increased by a further 1.25% because of the Social Care Levy) on dividends will also be removed. This was a complete u-turn announced before today after the PM came under serious pressure to revoke.
There will be no increase to the corporation tax rate as originally proposed, so this will remain at 19%, apparently the lowest in the G20. The corporation tax rate will be rising to 25% from April 2023, as originally proposed by the former Chancellor.
The SDLT-nil rate threshold has doubled from £125k to £250k with immediate effect, effectively removing the 2% band. No change.
The recent IR35 changes to off-payrolling will be repealed with effect from April 2023. IR35 legislation came into effect from April 2000. The repeal set out in the Mini-Budget were scrapped and therefore reversed so we’re back to where we were.
From April 2023 the Seed Enterprise Investment Scheme (SEIS) will enable companies to raise up to £250k. Investors will individually be able to put up to £200k into an SEIS for income tax relief. The scope of qualifying companies has been enhanced and the company can now be up to 3 years old to qualify, increasing from 2 years. No change
The current capital allowance regime will remain, with the maximum Annual Investment Allowance (AIA) staying at £1m. The Super-deduction will end as expected in April 2023. No change.
The government is introducing a digital VAT-free shopping scheme for non-UK visitors shopping in the UK. Retailers may need to get familiar with this if their overseas customers are asking. This could take some time for this to be introduced and a timeframe has not been confirmed, but likely 2024/25.
There will be a Universal Credit review helping recipients get into paid employment or face having benefits reduced.