Kwasi Kwarteng’s Mini-Budget: Key Announcements

Chancellor Kwasi Kwarteng delivered his mini-budget today (the 23^rd of September 2022). Continue reading to discover the main announcements made during the fiscal statement regarding the government’s economic plan to drive down inflation and cut taxes to encourage growth.

Chancellor to repeal IR35 legislation

As part of the Growth Plan 2022, Chancellor Kwasi Kwarteng will repeal the IR35 off-payroll working rules introduced in 2017 and 2021. From April 2023, workers across the UK will be responsible for deciding their employment status and ensuring they pay the appropriate amount of tax and National Insurance Contributions. The IR35 repeal has already been well-received within the industry. It is very positive news for contractors, freelancers and businesses that engage with temporary workers operating through a personal service company.

Taxes

The basic income tax rate will be cut by one percentage point from 20% to 19% from April 2023. This means that roughly 31 million people will be better off by an average of £170 per year, according to the Treasury. Chancellor Kwasi Kwarteng also announced that the 45% higher income tax rate (which currently applies to earnings above £150,000) would also be abolished.

Yesterday (the 22^nd of September 2022), it was announced that April’s 1.25% National Insurance increase which former Chancellor Rishi Sunak introduced, will be reversed from the 6^th of November. The tax reversal will save money for both businesses and around 28 million workers.

Business Support 

It was announced yesterday that alongside the National Insurance increase reversal, the 1.25% increase to income tax on dividends, introduced in April 2022, would also be reversed from April 2023. This means that those who pay tax on dividends will save on average £345 next year. The planned rise in corporation tax to 25% next year has been cancelled. The Chancellor said: “We will have the lowest rate of corporation tax in the G20. This will plough almost £19 billion a year back into the economy.”

The Chancellor has also pledged to cut taxes for businesses in designated sites for ten years to support jobs, growth and investment. The government is currently in talks with 38 local and mayoral combined authority areas in England with the idea to create “investment zones”, which they will aim to roll out more widely across the UK.

The Annual Investment Allowance, a business tax relief for plant and technology investment, is to remain at £1 million permanently – rather than returning to £200,000 in March 2023 as planned. The Chancellor also announced that the planned duty rises on beer, wine, cider, and spirits have also been scrapped.

Inflation

The government will set out its fiscal approach more fully in the future, and the Office for Budget Responsibility will publish an economic and fiscal forecast before the end of the year. Independent forecasters expect the government’s energy plan “will reduce peak inflation by around five percentage points”.

Housing

From today, you won’t pay any stamp duty on the first £250,000 of a property which has doubled from the previous £125,000 threshold. The Treasury has estimated that 200,00 more people can buy a new home every year without paying any Stamp Duty. Additionally, the government has increased the threshold first-time buyers will pay stamp duty from £300,000 to £425,000. The property value on which first-time buyers can claim relief is also rising to £625,000.

With aid from the energy price guarantee and an additional £400 grant, household bills are to be cut by an expected £1,000 this year. Millions of the most vulnerable households in the UK will receive additional payments, taking their total savings this year to £2,200. The total cost of the energy package, including business support, over the next six months, is estimated at £60 billion.

Other key announcements

• The introduction of VAT-free shopping for overseas visitors.
• New legislation will cut barriers and restrictions on building new roads, energy and rail infrastructure.
• Changing regulations to increase investment by pension funds into UK assets, boosting economic growth and benefitting savers. It also incentivizes investment in Britain’s tech and science companies.
• The EU-inspired cap on bankers’ bonuses is to be scrapped as part of the efforts to reaffirm the UK’s status as a financial services hub.
• The government is introducing legislation requiring trade unions to put pay offers to a member vote so strikes can only be called once negotiations have fully broken down.
• More than 100,000 people claiming universal credit will be required to regularly meet with their Work Coach and take active steps to find better-paid jobs or increase the hours they work – or face having their benefits reduced. Currently, those working up to 9 hours a week at the National Minimum Wage are required to meet regularly with their Work Coach – but this will be expanded to those working 12 hours a week from next week and those working 15 hours a week from January 2023. The aim is to reduce vacancies in the economy.

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