Some highlights
On the 23rd of September 2022, the Chancellor unveiled the UK’s 2022 Growth Plan.
Popularly referred to as the “mini-budget”, it has been described as being the ‘biggest package of tax cuts in a generation.’ But what does this mean for you and your business?
We know it’s a lot to process so we broke it down for you and are sharing some highlights here from the mini-budget.
🔘 Cancellation of Corporation tax increase
The Corporation Tax rate that was supposed to increase to 25% for businesses with annual profits above £250,000 from 1st April 2023 will not go ahead as planned and will remain at 19%. Regardless of profits (above £250,000 or below), the existing 19% Tax Charge will apply to all businesses.
🔘 Income Tax Measures
Basic Income Tax Rate in England and Northern Ireland will be cut from 20% to 19% from April 2023.
🔘 National Insurance Contributions
The rate of Employee and Employer National Insurance Contributions which were boosted by 1.25% in April 2022, will revert to its former rates starting November 2022.
This means that from 6th November 2022, NI rates will revert to:
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- Class 1 Employee’s NI (for most employees): 12%
- Class 1 Employer’s NI: 13.8%
- Class 4 NI for the self-employed: 9%
Class 2 NI for the self-employed was not affected by the increase last time and therefore will not be changed.
🔘 Health and Social Care Levy (HSCL)
Planned HSCL of 1.25% which was to come into effect from April 2023 has been cancelled.
🔘 Annual Investment Allowance (AIA)
The threshold for AIA has been “permanently” set at £1m and will not reduce to £200,000 as previously planned. This will help immensely for businesses who are planning invest into expansion.
🔘 IR35 (off payroll working rules)
IR35 reforms made in 2017 and 2021 rules are to be repealed from April 2023. This means the responsibility will not shift back to the service provider to determine their own employment status and make sure of the payment of appropriate amounts of tax and national insurance contributions. The contractor will determine if their work should be taxed as employment income and will be responsible for paying any additional tax and NI.
🔘 Reversal of Increase in tax rate on dividends
In April 2022 the rate of income tax charged on dividends was increased by 1.25%. This will be reversed from April 2023 and dividends will be taxed at 7.5% for basic rate tax payers and at 32.5% for higher rate tax payers.
What does this all mean for your business?
According to the government, the mini budget means employees will be taking home a little more as wages from the NIC reduction and businesses across the UK will save a lot due to corporation tax changes. This also provides stability to businesses and leaves a pace to plan around growth while continuing your business during this crisis.
With a generous capital allowance the focus is to encourage growth with businesses. Who can argue with that?
While all of this is so welcomed, smart businesses will dive into the details and plan ahead with accordingly. For further details and help contact the AccNet team.