Newly appointed Chancellor of the Exchequer, Kwasi Kwarteng, has just delivered a speech (fiscal event speech as the government is calling it) and it’s packed with implications for individuals, small businesses, contractors, and those in property. We have highlighted below some of the key announcements that would affect you.
Income tax & National Insurance
The announcements were.
- There will be a cut in income tax to 19% from April 2023
- 45% higher rate of income tax is abolished from April 2023
- National Insurance and dividend tax increases of 1.25% will be reversed from 6 November 2022
What does this mean? Well, if you take dividend then the basic rate will revert to 7.5% from 8.75% and the higher rate to 32.5% from 33.75% and from April 2023 those will be the only two rates for dividend tax; 7.5% and 32.5%.
IR35 – back to the old determination rules
The planned changes to how IR35 operates, moving the compliance requirements from the contractor to the client for large and medium-sized private sector businesses who engage freelancers has been scrapped and will revert to contractors determining their employment status.
This is very welcomed news to the freelance and contractor population as many were wrongly determined to be inside IR35 and thus paying huge amounts of tax (unfairly in my opinion).
However, a cautionary note here to still determine your IR35 status before any contract and to consider getting contract assessments and insurance. HMRC will no doubt continue to target personal service companies for investigations. Forewarned is forearmed.
Corporation Tax rate holds steady at 19%
The rate at which limited companies pay Corporation Tax was originally planned to increase from 19% to 25% from April 2023 but these plans have been axed. The rate of Corporation Tax will now remain at 19%.
Other notable business announcements
The annual investment allowance for businesses will be permanently set at its highest level of £1 million from April 1 next year. This will give 100 per cent tax relief to businesses on their plant and machinery investments up to the level of £1 million.
The company share option plan limit that allows businesses to offer employees share options is being raised from £30,000 to £60,000.
Tax cuts and liberalised planning rules to be offered to release land for housing and commercial use.
Further announcements were made on big infrastructure projects, investments zones, strike actions by unions and others which we have not gone into here.
The threshold for stamp duty on house purchases has been raised from £125,000 to £250,000 from tonight (23 September 2022). For first-time buyers it will rise from a £300,000 threshold to £425,000. The value of the property on which first-time buyers can claim relief has been raised from £500,000 to £625,000.
There will be a freeze on Energy bills for households. This has been capped at an average of £2,500 a year for two years, a £1,000 saving at present energy prices. Bills have also been capped for six months for businesses, charities, and public sector organisations such as schools and hospitals from October 22.
Shopping and alcohol
- VAT-free shopping for overseas visitors and a digital VAT-free shopping scheme will be introduced for international tourists outside of airports
- Planned increases in the duties on beer, for cider, for wine, and for spirits cancelled. Enjoy 😊