In association with
Save content
Have you found this content useful? Use the button above to save it to your profile.
A copy of the Growth Plan on a clear table
HM Treasury

Mini-Budget promises to ‘ignite growth’ with lower taxes

by

In his first fiscal statement since taking office, Chancellor Kwasi Kwarteng used today’s ‘mini-Budget’ to deliver a package of more than 30 measures he said would tackle high energy bills, drive down inflation and cut taxes to drive growth.

 

23rd Sep 2022
In association with
Save content
Have you found this content useful? Use the button above to save it to your profile.

After yesterday’s indication from the Bank of England that the country may already be in recession, the Chancellor focussed his messaging on 'trickle-down' economic measures that he said will "drive the country’s economic growth while maintaining responsible public finances."

There were a few surprises too -- not least the repeal of IR35 from 6 April 2023, which means contract workers will once again be responsible for determining their tax and National Insurance contributions. 

The Chancellor also announced the closure of the Office of Tax Simplification, the independent body responsible for helping to make the UK tax system simpler and easier to interact with for taxpayers.

On the OTS, Kwasi Kwarteng said: “I'm hugely grateful to the Office of Tax Simplification for everything they have achieved since 2010. But instead of a single arm's length body which is separate from the Treasury and HMRC, we need to embed tax simplification into the heart of government.”

He added that instead all tax officials will be “mandated to focus on simplifying our tax code”. 

The reversal of National Insurance increases was announced in advance, along with increases to dividend tax rates. The Levy was expected to raise approximately £13bn a year, ring-fenced for health and social care spending but the Chancellor said that funding will be maintained.

A cut in the basic rate of income tax to 19p in April 2023, a year earlier than planned, was also announced in a bid to demonstrate support for households, as many struggle with increases in the cost of living. This was coupled with a doubling of the SDLT threshold to £250,000, with the first-time buyers' threshold raised from £300,000 to £425,000, all effective from today.

Other key announcements were:

  • Cancellation of the planned increase in corporation tax -- it remains at 19%
  • A single higher rate of income tax of 40%, abolishing the 45p rate for those who earn over £150,000 from April 2023
  • Planned beer, wine, cider, and spirits duty rate increases cancelled
  • The cap on bankers' bonuses removed 
  • Sales tax-free shopping for overseas visitors
  • Proposed changes to allow pension funds to invest more widely
  • A proposal to automatically sunset EU regulations by December 2023.
  • The additional rate for savings, dividends and default rates will also be removed from April 2023, and this change will apply UK-wide.

The Chancellor also confirmed the creation of low-tax Investment Zones across 38 local and combined authorities in England - an extension of the 2021 freeports policy - as a means of ‘levelling up’ economic growth. He also talked of liberalising planning rules and new legislation to speed up the delivery of around 100 major infrastructure projects across the UK.

Kwasi Kwarteng said: “Growth is not as high as it needs to be, which has made it harder to pay for public services, requiring taxes to rise. This cycle of stagnation has led to the tax burden being forecast to reach the highest levels since the late 1940s.

"We are determined to break that cycle. We need a new approach for a new era focused on growth.

 “That is how we will deliver higher wages, greater opportunities and sufficient revenue to fund our public services, now and into the future. That is how we will compete successfully with dynamic economies around the world.”

Inflation likely to peak at 11%

On Thursday, with the announcement of a further 0.5% interest rate rise to 2.25%, the Bank's Monetary Policy Committee (MPC) said it expected the UK economy would shrink by 0.1% in this third quarter of the year, after it contracted by 0.1% in the second quarter.

Having previously forecast that inflation would reach 13% in October, the MPC also said that the government’s move to subsidise domestic bills through the Energy Price Guarantee meant inflation would now likely to peak at just under 11%.

ACCA calls for simpler tax system

Reacting to the statement, Glenn Collins, Head of ACCA UK said: "IR35 has desperately needed to be reviewed. The tax system as it stands is overly complex and burdensome for businesses, individuals and public bodies. The reform in April 2021 to IR35 left many businesses without the support they desperately needed due to confusion surrounding the rules and regulations. 

"Now more than ever, simplicity is key," continued Collins. "A simpler tax system avoids the potential for mistakes and enquiries, which too often distracts HMRC from addressing serious and deliberate evasion.  However, the dissolution of the Office of Tax Simplification is worrying and will impact UK businesses. The OTS previously worked with holding agencies and provided guidance on previous tax reforms and regulations. Without the OTS and with further details needed on how the government will simplify tax many UK SMEs will still be facing a complicated and unclear tax system.”

Chris Sanger, EY’s head of Tax Policy, said that the departure of the Office of Tax Simplification will leave a hole that the government may struggle to fill.  He added: "The government’s aspirations to embed simplification directly into the policy making process of HM Treasury and HM Revenue & Customs is worthy, but without a separate organisation to reinforce this need, there is a risk that simplification will be low on the list of priorities of policy makers.

“During its decade-long life, the OTS has prompted many policy discussions that would otherwise have been difficult to have, including on IR35. Following the abolition, many will be looking to government to continue to engage on the scope for reform, rather than having all such debate within the closed rooms of the Treasury.”

The 2022 Mini-Budget at glance

Replies (53)

Please login or register to join the discussion.

avatar
By Beef curtains
23rd Sep 2022 11:33

When did the OTS "simplify" anything? Did he say "abolish" IR35, it's just that I didn't hear that. I thought he said "simplify" it. Abolition of this idiotic, utterly bonkers, idealogical nonsense, so beloved of Brown and that ghastly Primarolo woman, is most surely and sorely needed . I just hope that this statement is just the start and that we've seen nothing yet.

Thanks (14)
Replying to Beef curtains:
avatar
By AndyC555
23rd Sep 2022 11:49

The initial regulatory impact assessment for IR35 in 1999 stated that HMRC expected the measure to generate £220 million per year in National Insurance contributions, and a further £80 million in income tax.

In May 2009 the Professional Contractors Group received a reply to a request under the Freedom of Information Act to HMRC, asking just how much tax revenue IR35 had in fact raised for the exchequer. The FOI reply revealed that in the tax years 2002/03 to 2007/08, IR35 directly raised just £9.2 million.

Thanks (4)
Replying to AndyC555:
avatar
By johnjenkins
23rd Sep 2022 12:43

Par for the course when HMRC start releasing figures.

Thanks (0)
Replying to AndyC555:
avatar
By nikgwins
24th Sep 2022 22:47

As much as I loathed the HMRC tools, the dogmatic interpretation of contracts, and the knee-jerk blanket decisions by large corporates in how they dealt with freelancers... I feel like it had the intended outcome in many cases and much more tax than the implied £1.8m a year has been taken following the changes (rightly or wrongly)

Thanks (0)
Replying to Beef curtains:
avatar
By schocca
23rd Sep 2022 11:51

4.20 Repealing off-payroll working reforms – The 2017 and 2021 reforms to the offpayroll working rules (also known as IR35) will be repealed from 6 April 2023. From this date,
workers across the UK providing their services via an intermediary, such as a personal service
company, will once again be responsible for determining their employment status and paying
the appropriate amount of tax and NICs

Thanks (6)
avatar
By Open all hours
23rd Sep 2022 11:37

Much of what KK said implied that MTD would have to go. It makes even less sense now than it did at 9.30 this morning.

Thanks (6)
Replying to Open all hours:
By SteveHa
23rd Sep 2022 12:14

I really hope his middle name isn't Kevin.

Thanks (6)
Replying to Open all hours:
avatar
By Matt1999
23rd Sep 2022 12:28

I was hoping he was going to say that when he started talking about easing the administrative burdens on business. Hopefully that is to come.

Thanks (1)
avatar
By johnjenkins
23rd Sep 2022 11:50

To me the only thing he really did was to basically abolish IR35. The rest was just getting rid of rises that should never have seen light of day in the first place including 45% tax. As for MTD the only thing he might do is get rid of QU. As for HMRC taking over tax simplification, I really did laugh out loud. If you really want to get growth and beat inflation then he has to drop VAT to 15%. Who knows it may come.

Thanks (1)
Replying to johnjenkins:
avatar
By cereus77
23rd Sep 2022 13:32

But he didn’t abolish IR35 - rather just repealed the off payroll changes. This means that we still have IR35 but that contractors are responsible for determining and defending their own status in the event that HMRC decide that IR35 applies rather than employers.

Thanks (4)
Replying to cereus77:
avatar
By JamesDS
23rd Sep 2022 17:21

Which means they'll go back to doing what they did before: Taking the view that they are outside and inviting HMRC to FTT if they disagree. Boot's on the other foot now boys!

Thanks (0)
avatar
By ourpetsheadsarefallingoff
23rd Sep 2022 11:52

Did anyone else think he said that the dividend tax rate increase of 1.25% would be reverted on 6th November along with NI?! The Treasury's publication has confirmed it will be from April 2023. I didn't much fancy two different rates in the same year

Thanks (0)
avatar
By petestar1969
23rd Sep 2022 12:03

Is the Chancellor trying to wind up the MPC?

Yesterday, the MPC put up interest rates to try and cool the housing market.

Today, Khazi fiddles with Stamp Duty. This will stoke house prices.

Maybe its because the MPC was a Labour idea?

The best thing he mentioned was forcing unions to put all pay offers to a member vote instead of the union flat out saying no and demanding more.

Thanks (4)
Replying to petestar1969:
avatar
By johnjenkins
23rd Sep 2022 12:11

Puting pay offers to members won't make any difference. If the first offer is rejected and another is made there will be no end to it. If negotiations fall down then ACAS should step in and decide. That decision should be binding.

Thanks (0)
Replying to johnjenkins:
avatar
By petestar1969
23rd Sep 2022 14:48

Huh?

At the moment offer 1 is put to the Union and they reject it out of hand every time. If the first offer was put to the members, they might actually accept it.

Thanks (1)
Replying to petestar1969:
avatar
By johnjenkins
23rd Sep 2022 15:47

Yer right. When the union say "this is the first offer let's stick out for a second".

Thanks (0)
Replying to petestar1969:
avatar
By Peter Bromiley
23rd Sep 2022 12:47

I don't see why the state should take more cash off people simply because they want to buy a house.
And the interest rate rise wasn't there to cool the housing market. It was there to reduce inflation generally (although a recession is now the bigger danger).
Anything that lets people keep more of their hard-earned cash is a step in the right direction given the high level of taxes we now have.

Thanks (1)
avatar
By Self-Employed and Happy
23rd Sep 2022 12:14

Well that was a depressingly disappointing "mini budget"

Instead of tax cuts for everyone they should have just raised the Personal Allowance, meaning it wouldn't benefit anyone earning over £100k other than to extend the point at which they receive no personal allowance.

Absolutely no indication of a willingness to close tax loopholes for individuals and companies whatsoever, no willingness to hammer the coffers of the Utility / Oil companies raking profits in, which are then paid out as Dividends, usually to foreign investors to the money leaves the country completely.

BoE raises interest rates, you'd think to maybe cool the property market, don't worry we'll contradict that with Stamp Duty reductions again, meaning we will get even further away from what is needed which is a "correction" of property prices, allowing builders to reduce building etc means THEY control the market, make those builders actually build "x" amount per year or remove their ability to build by refusing planning on all of their projects.

A **** poor budget from a **** poor government that can't be properly held to account because of the **** poor opposition.

It's a complete hopeless mess.

Thanks (15)
avatar
By Brodders
23rd Sep 2022 12:15

Doesn't appear they've got rid of the 60% tax rate for incomes between £100k to roughly £126K though does it? Have they forgotten about the tapering personal allowance one wonders...

Thanks (6)
Replying to Brodders:
avatar
By Peter Bromiley
23rd Sep 2022 12:50

It seems such an obvious anomaly that I'm amazed no Tory Chancellor since Darling has seen fit to reverse it. Why does someone earning £100k pay tax at a marginal rate of 60% yet someone on £126k pay tax at a marginal rate of 40%? There is no logic to it.

Thanks (4)
Replying to Peter Bromiley:
Tornado
By Tornado
23rd Sep 2022 13:04

You are right.

Everyone should have the same tax free personal allowance regardless of what they earn.

Thanks (9)
Replying to Peter Bromiley:
avatar
By Brodders
23rd Sep 2022 13:34

I honestly wouldn't be surprised if they had forgotten about it!

It is a ludicrous disincentive to work and with high inflation it is catching a lot lot more people than it was ever intended to (not that it was ever a good idea!) and should simply be abolished.

Thanks (4)
Replying to Brodders:
avatar
By AndyC555
23rd Sep 2022 13:58

And of course, the £100k starting point for losing PAs was introduced in April 2010 and hasn't increased since then.

If it had increased in line with RPI, that would mean the starting point would be c£155k.

Thanks (2)
Replying to AndyC555:
avatar
By Brodders
23rd Sep 2022 14:26

Funny that isn't it...stealth taxes work depressingly well. How many people realise their Personal allowance, basic rate band etc has been frozen?! Don't think there is a rate that's left to freeze is there??

Thanks (1)
avatar
By Hugo Fair
23rd Sep 2022 12:40

Wow. If anyone wondered whether there is a worse state to be in than that of a "3rd-world economy" then buckle-up, because it looks like Truss and Kwarteng are determined to seek it out.

More money for their mates and a reduction in state revenues ... with a 'promise' not to cut existing funding commitments. Shares in the porcine flying school have gone sky high!

Main conclusion? General Election in May/June next year (after the IT cut and energy controls but before people realise how much worse off they really are ... and the sunshine might help).

Thanks (7)
avatar
By [email protected]
23rd Sep 2022 12:42

I am still at a loss to understand the Bank of England’s further increase in interest rates. I had understood from my studies of economics that interest rates were used to take the heat out of a booming economy and in turn reduce inflation.
You have to ask what “heat” for with the onslaught of higher prices in all areas of the economy, caused in the main by external forces, there is not only no heat but no money in the economy.
How does the BOE judge the so-called heat since people have no money to spend and are left with the choice of heat or eat?
The current inflation is not being fueled by people having too much money to spend but by outside sources, over which we have little or no control. There is little heat in the economy and if prices continue to rise there will be little heat in people’s homes.
When will the Monetary Policy Committee learn to understand the plight of the man and woman in the street? We have prices rising in all sectors and the BOE now puts yet another nail in the coffin by introducing higher interest rates and in turn higher mortgage payments to fan the flames even higher.

Thanks (1)
Replying to [email protected]:
avatar
By ianmatt
23rd Sep 2022 12:48

ewobrien-AT-majoraccountants.com wrote:

I am still at a loss to understand the Bank of England’s further increase in interest rates. I had understood from my studies of economics that interest rates were used to take the heat out of a booming economy and in turn reduce inflation.
You have to ask what “heat” for with the onslaught of higher prices in all areas of the economy, caused in the main by external forces, there is not only no heat but no money in the economy.
How does the BOE judge the so-called heat since people have no money to spend and are left with the choice of heat or eat?
The current inflation is not being fueled by people having too much money to spend but by outside sources, over which we have little or no control. There is little heat in the economy and if prices continue to rise there will be little heat in people’s homes.
When will the Monetary Policy Committee learn to understand the plight of the man and woman in the street? We have prices rising in all sectors and the BOE now puts yet another nail in the coffin by introducing higher interest rates and in turn higher mortgage payments to fan the flames even higher.

The interest rate increases coming will eat people alive. Too many slavishly backed the China virus restrictions, which went on for so long they will in the end wreck the prospects of millions of our young.

The consequences of 18 months of free money not to work were not hard to work out, in many cases was free money and work.

Thanks (1)
Replying to ianmatt:
VAT
By Jason Croke
23rd Sep 2022 13:14

Agree that raising interest rates is hardly the right approach to inflation caused by a lack of supply, rather than a lack of demand. What are they trying to "cool"?

Capping the electric/gas will calm the inflation a little, but at a cost of something like £60b, which means taxpayers are on the hook for this, but just not today.

The other tax cuts/freezes adds up to something like £40b, so we have a £100b bill that can't be paid off via personal tax (as that's gone down), by Corporate Tax (as that's been frozen) and all this talk of encouraging businesses to invest at a time when the bank has put up interest rates!

Once again, the focus is on the property market, government and banks need to keep that bubble from bursting and I suspect this SDLT cut has staved off what was an likely an imminent property crash.

Thanks (2)
Replying to [email protected]:
avatar
By philaccountant
23rd Sep 2022 13:31

I would have thought the rate rise is mainly about fear of capital flight to the US now. And this budget has made that fear much more likely to come to pass.

Thanks (1)
Replying to [email protected]:
avatar
By raju m
23rd Sep 2022 14:48

When I bought my house in 1979 the mortgage interest rate was 15% PA.!!!!!!!!!!
Raj mehta

Thanks (1)
Replying to raju m:
Neophyte
By Neophyte
23rd Sep 2022 17:53

For mortgage holders that's equivalent in real terms to less than 3% now due to the difference in wages and house prices. High interest rates will have a devastating impact on people who over leveraged betting that low interest rates would be effective in perpetuity.

Thanks (0)
Replying to Neophyte:
avatar
By Hugo Fair
23rd Sep 2022 18:39

I must have missed that class in basic maths that you attended.

I know it's annoying to later generations to hear that my current house cost £16k (in 1974) + I don't expect commiserations 45 years later on hearing that the initial mortgage rate of under 5% had ballooned to 18% within 5 years ...
BUT my annual salary was only just over £1k, so I had to borrow from elsewhere to get a big enough deposit (as mortgage was only 3.5 x salary) - and take on 2 other jobs and move friends in (on below market rents) to almost cover outgoings.
[There were plenty of weeks where the only option was to find a friend who had some food].

However that's just painting a picture of the past.
My point is that x% interest rate is x% irrespective of inflation or other fiscal measurements ... and every % point of increase over what was originally planned will hurt the same (whether in 1974 or 2022).
The only possible difference is the proportion of your earnings being spent on the interest ... for that blame the lenders willingness to lend on higher multiples.

Thanks (2)
Replying to Hugo Fair:
avatar
By raju m
23rd Sep 2022 23:08

Very well explained!!!!!!

Thanks (0)
Replying to Hugo Fair:
avatar
By justsotax
27th Sep 2022 11:07

so you got a mortgage of £3.5k had to get another job and take on a lodger and borrow from others to get the deposit.....kinda sounds like you overstretched.....

Thanks (0)
Replying to justsotax:
avatar
By johnjenkins
27th Sep 2022 11:22

Many years ago the bank manager (yes they had managers in those days) would say take out a mortgage that you can't afford as your home is your castle and will always increase in value, whilst your salary (wages, remuneration) would increase every year. You could call it stability. So what has happened??????????????

Thanks (0)
avatar
By ianmatt
23rd Sep 2022 12:43

While the rolling back of tax rises implemented by the previous Tory government is welcome, particularly the IR 35, no effort to cut spending will mean, even if they win again in 2024 they may go back to tax increases again.

I see this as an effort to give themselves a chance of holding power, not a real change in big tax and spend strategy.

Thanks (0)
Replying to ianmatt:
avatar
By johnjenkins
23rd Sep 2022 12:50

2024 will be another hung Parliament, which means a coalition. Now who will the Lib/Dems turn to. As Liz was once a Lib/Dem that will either go in her favour or against (bit obvious). They have given themselves perhaps 12 months breathing space. If there is more to come, it needs to come PDQ.

Thanks (0)
Caroline
By accountantccole
23rd Sep 2022 12:49

How the hell is this levelling up? The poor needed support not the rich!

On the upside - will I be able to fill my suitcase when I come to the UK and claim all my VAT back? (not entirely sure how that helps anyone in the UK?)

Thanks (5)
Replying to accountantccole:
By ireallyshouldknowthisbut
23rd Sep 2022 13:44

no Carol, you don't understand, when KK cuts income tax from 45% to 40% for those over £150k a year, all of that money will go straight into the economy promoting growth! Its trickle down economics!

Not a penny of it will be stashed away, or spent on a nice holiday in France (export) or a new shiny car from Germany (export) or anything like that. All spent in the UK. Every penny.

Just like not taking the energy suppliers on their super profits, all of those dividends will flow back into the economy. Even the high % which are owned by er, pensions funds, and er overseas investors.

What you cant do is give Nurses a £1000 pay rise as they will just squander it on day to day living costs.

I think I got it right.

Thanks (12)
Replying to ireallyshouldknowthisbut:
avatar
By raju m
23rd Sep 2022 23:10

very funny!!!!

Thanks (0)
avatar
By DavidWinter
23rd Sep 2022 12:49

5% for their mates, 1% for the peasants.

Thanks (6)
Replying to DavidWinter:
avatar
By Hugo Fair
23rd Sep 2022 13:20

"Oi, 'oo yer calling a peasant? You hoity -toity ..." (ooer I think he heard me)
"Me? No I said nuffing, sir. It was probably 'im over there. You want me to hit 'im?"

[Rees-Mogg daydreaming of a return to 'better' times].

Thanks (2)
avatar
By anthonystorey
23rd Sep 2022 13:44

Very much like Thatcher's first budget - abolish the top rate of tax and recoup it from those at the bottom of the pile. Maybe Liz Truss is Margaret Thatcher reincarnated.

Thanks (0)
Replying to anthonystorey:
avatar
By raju m
23rd Sep 2022 14:56

margaret Thatcher had a balanced budget. She was not borrowing and leaving hugh burden for the future tax payers. Raj Mehta

Thanks (2)
VAT
By Jason Croke
23rd Sep 2022 14:07

As an aside, I thought it odd that the Chancellor would use his budget speech to talk about new laws on union voting rules.

I get that trains and government funding of the networks is a financial topic, but announcing laws to reduce union powers seemed a bit out of place.

It'd be like a budget where when talking about investing in new roads being built, the Chancellor goes onto to highlight that there have been some changes in the highway code that affect the right of way of pedestrians and cyclist. Useful to know but relevant how?

Thanks (2)
Replying to Jason Croke:
By ireallyshouldknowthisbut
23rd Sep 2022 15:09

I think he was hoping it would get lost in the noise. if that was announced on a quiet day it would be front page news, and even the Daily Mail would struggle spinning more complex red tape for unions as a plus.

Thanks (1)
avatar
By TonyRedondo
23rd Sep 2022 14:13

I'm in sock with the new tax cuts.

They mostly apply to the rich. Additional tax rate lowered from 45% to 40%. That's a massive tax cut that only the 1% can make use of.

Corporation tax raise cancelled. It will stay at 19%.

And banker's bonuses caps abolished. How come this measure is supposed to help the economy?

Thanks (4)
avatar
By Cyrille1987
23rd Sep 2022 19:32

Political suicide for the Tories. A £10k tax cut for those earning £500k. The government will then refuse in the next few weeks to give a decent pay rise for nurses earning £30k. The same nurses such as my wife who put their lives on the line working through the pandemic when those earning £500k such as my City trader tax return clients worked from home. If Labour don’t win the next election then they are finished.
And if it’s morally wrong it will not work anyway-the markets will see to that.

Thanks (0)
avatar
By Cyrille1987
23rd Sep 2022 19:32

Political suicide for the Tories. A £10k tax cut for those earning £500k. The government will then refuse in the next few weeks to give a decent pay rise for nurses earning £30k. The same nurses such as my wife who put their lives on the line working through the pandemic when those earning £500k such as my City trader tax return clients worked from home. If Labour don’t win the next election then they are finished.
And if it’s morally wrong it will not work anyway-the markets will see to that.

Thanks (2)
Replying to Cyrille1987:
avatar
By raju m
24th Sep 2022 17:22

Tax cuts for those earning over £ 500000 will be over £17000.!!!!!

Thanks (0)

Pages