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Key points from Friday’s “mini-budget”

26th Sep 2022
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*As of Monday, 17th October, 2023, much of the content in this article will be outdated due to the reversal of some of the measures previously announced in the mini-budget.

There I was Friday morning, minding my own business and listening to a podcast on the way into work, when BAM - seemingly out of nowhere, the government dropped (what they are calling) the biggest tax cuts in a generation. Kwasi Kwarteng, the current champion of the infinite game of musical chairs the Treasury likes to play, has come in all guns blazing and said I am not here to play as a string of tax cuts “to deliver the growth of the economy“ have been announced. We were surprised to see just how much of an impact this "mini-budget" will have on payroll. So what has been announced?

Income tax

  • The basic rate of income tax has been cut to 19% from April 2023 (this is projected to make 31 million people £170 better off a year).

  • The 45% higher rate of income tax has been abolished. Instead, a single higher rate of income tax of 40% will be introduced from April 2023.

National insurance

  • The 1.25% point increase in national insurance that has been in effect only since April this year has been reversed. 
  • The new health and social care levy which was supposed to help the NHS has now been scrapped for good.

Work and investment

  • The rise of corporation tax from 19% to 25%, scheduled to come into effect in April 2023, has been scrapped. 
  • The rules surrounding IR35 (or off-payroll working) are to be simplified - reverting to pre-2017 rules.
  • Regulation changes will be introduced, making it possible for pension funds to increase UK investments.
  • New and start-up companies will be able to raise up to £250,000 under a scheme giving tax relief to investors. 
  • Share options for employees increased from £30,000 to £60,000.

What else?

  • No stamp duty on the first £250,000, rising to £425,000 for first time buyers comes into effect immediately. 
  • Freeze on energy bills with claims this could shrink inflation by five points. 
  • VAT free shopping for foreign visitors. 
  • The planned increase in duties on beer, cider, wine and spirits has been scrapped.
  • And interestingly, the cap on bankers’ bonuses has also been scrapped.

I mean, that all sounds great doesn’t it? But if you dig a little deeper all it means is that those who earn more will benefit more, and the more you earn, the better off you’ll be. And this has pretty much been the Cabinet under Liz Truss all over – have you heard the joke about trickle-down economics? Never mind, 99% of you wouldn’t get it.

Is this just a grand display? An attempt to get us on-side? Is all this really feasible in the long run? It’s like being a child of two divorced parents who are trying to win you over with presents and promises when all you want is someone to be there to kiss you better when you fall and scrape your knee. For now, all we can do is stick a plaster on it and hope for the best.

 

Aoibheann Byrne

Aoibheann Byrne | BrightPay Payroll Software

 

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