The Chancellor’s statement, or Growth Plan, designed to boost economic growth was announced yesterday, providing the biggest tax cuts since 1972. A summary of the main points are:

Income Tax

The basic rate of income tax will be reduced to 19% from April 2023 (currently 20%).

The 45% additional rate will be abolished from April 2023. This will mean that there is a single higher rate of income tax of 40% on earnings over £50,270. (UPDATE - This change was reversed on 3 October 2022).

National Insurance

The 1.25% increase, introduced in April 2022, will be reversed as from 6 November 2022, and the Health and Social Care Level will be completely cancelled.

National Insurance rates will be:

Class 1 – for employees, 12 % and 2% (currently 13.25% and 3.25%)
Class 1 – for employers, 13.8% (currently 15.05%)
Class 4 – for self employed, will be averaged across the 2022/2023 tax year at 9.73% and 2.73% (for income over £50,270).

Dividend Tax Rates

Will be reduced from April 2023. Basic rate will be 7.5% (currently 8.75%) and higher rate will be 32.5% (currently 33.75%).

Corporation Tax

Will remain at 19%, with the planned increase in April 2023 to 25% being scrapped.

Corporation tax due on overdrawn director loan accounts reduces on loans made after 6 April 2023 to 32.5% (currently 33.75%).

Capital Allowances

Annual Investment Allowances will remain at a limit of £1million and will not now reduce in April 2023 as originally planned.

IR35

Off payroll work rules are to be simplified from 6 April 2023, this will mean that workers providing services via an intermediary will determine their own employment status and pay the appropriate tax and national insurance.

Pensions

Draft regulation changes to the charge cap will be brought forward to provide clarity and flexibility so that pension funds can increase UK investments.

Energy Bill Relief Scheme

For businesses – running initially for a 6 month period and applying to energy usage from 1 October 2022 to 31 March 2023. There is no need for businesses to apply for this scheme, as savings will be automatically applied to bills from October 2022. The government will review the scheme in 3 months time to determine support after 31 March 2023.

Stamp Duty

Nil tax threshold increased to £250,000 from 23 September 2022 (was £125,000).

First Time Buyers Relief increased to £425,000 (was £300,000), with the eligibility rate increased to £625,000.

Seed Enterprise Investment Scheme (SEIS)

From April 2023 new and start up companies will see an increase in investor limits and the gross asset limit will increase, to encompass more companies.

If you need any help or clarification on any of the above changes, please contact us.