How will the Mini Budget affect you?

Chancellor Kwasi Kwarteng presented his first mini budget, find out in what way this is going to affect you and your business.

28 September 2022
Reading time
Around 6 min

In an effort to boost the UK economy and promote growth at a targeted rate of 2.5% per year, Chancellor Kwasi Kwarteng presented his first mini budget last week. This was accomplished mostly through a number of tax reforms. These are the key points:

Cost of energy crisis

To help individuals and businesses manage the costs of the energy crisis, the government has taken three actions. These are listed below:

  1. Based on current energy prices, the Energy Price Guarantee will reduce the unit price that consumers pay for gas and electricity for an ordinary home for the next two years to £2,500, saving that household £1,000 annually. All UK homes will still receive the promised additional £400 payment off winter costs, and more assistance will be given to households that are more disadvantaged.

  2. All UK businesses, including charities and the public sector (such as schools and hospitals), will pay less for wholesale gas and electricity thanks to the new Energy Bill Relief Scheme. All UK businesses will receive a price guarantee as a result, comparable to the one offered to households.

  3. Energy providers have difficulties as a result of the significant volatility of energy costs, which rise and fall on an hourly basis. The government has launched an Energy Markets Financing Scheme to fight this, and the Bank of England will support it.

Tax changes

In his speech, the chancellor stated that "tax is key to solving the riddle of growth." He stated that instead of closing the Office of Tax Simplification (OTS), everyone in the government would be required to simplify taxes. These measures included:

  • Removing the proposed increase in corporation tax (CT), which is scheduled to increase from its current rate of 19% to 25% the following year. 

  • Bank CT Surcharge will continue to be 8%. 

  • The Annual Investment Allowance (AIA), which offers 100% tax relief on investments in machinery and plant, will no longer decrease to £200k as originally anticipated but rather stay at the current level of £1m. 

  • Beyond 2025, both the Venture Capital Trust and the Enterprise Investment Scheme will stay in effect. 

  • The Seed Enterprise Investment Scheme and Company Share Option Plans will see limits increased to make them more generous.

  • The government will do the following to help businesses cut wasteful costs:

    • By December 2023, all EU regulations will be examined, updated, and repealed where appropriate in order to lighten the burden on businesses and promote growth.

    • By abolishing the 2017 and 2021 reforms and maintaining a tight eye on compliance, you can simplify the IR35 (off-payroll working) regulations.

Personal taxation

  • On income over £150,000, the Additional Rate of Income Tax, which is now at 45%, will be removed. 

  • Beginning in April 2023, the Basic Rate of Income Tax will drop from 20% to 19%, one year ahead of schedule.

National insurance

The Health & Social Care Levy, scheduled to take effect in April 2023, will be scrapped, the government stated yesterday. The interim 1.25% increase in National Insurance contributions for both employees and employers will be removed on November 6 of this year. 

Tax on stamps and land (SDLT) 

As of right now, the following modifications to SDLT are in effect: 

  • The SDLT ceiling will increase to £250,000

  • The SDLT threshold for first-time buyers (FTB) rises to £425,000 

  • The amount that can be claimed as the maximum property value for FTB relief has increased to £625,000

New investment zones

Planning regulations will be relaxed in new investment zones at predetermined, approved sites, freeing up land and accelerating development. 

Businesses at selected tax sites will have their taxes reduced for ten years, while the following will see accelerated tax reliefs: 

  • Structures & Construction 

  • 100% tax reduction is available for eligible investments in machinery and plant. 

  • On purchases of land obtained for new commercial or residential construction, no stamp duty will be due. 

  • There won't be any business rates to pay on recently purchased business premises. 

  • Employers who bring on new hires at the tax site are exempt from paying National Insurance on the first £50,000 of wages made by the new hire.

Other changes

  • For international customers, a new VAT-free shopping programme will be implemented. 

  • To aid smaller breweries, the anticipated hikes in alcohol duty for beer, cider, wine, and spirits are cancelled, and the Draught Relief programme will be expanded to cover smaller kegs of 20 litres or more.

Summary of the not so mini ‘Mini Budget'

This "Mini Budget," is intended to combat inflation and rising energy prices while fostering economic growth. We witnessed a return to classic Conservative economics in what was hailed as the beginning of a new era.

This included rolling back planned tax increases, going even farther by slashing personal and business taxes, and proposing policies to simplify regulations across a variety of sectors. 

As always our bean-counting superheroes are here to maximise on all new budget releases to ensure your management accounts, VAT returns and taxes are as cost effective for your business as possible.

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