Kwasi Kwarteng in his new role as chancellor unveiled his plans for growth, bringing down inflation, backing business and helping households. Athough much of its content had already been released, it still contained a few surprises.
The headline changes are:
- Corporation tax – the proposed rise to 25% has been cancelled, keeping it at 19%.
- Annual Investment Allowance - the £1m allowance is to remain permanent, rather than it returning to £200,000 in March 2023. This gives 100% tax relief to businesses on their plant and machinery investments up to the higher £1m limit.
- Income tax – the basic rate of income tax is to be reduced to 19% in April 2023 – one year earlier than planned – with 31 million people getting on average £170 more per year. In a surprise move, the chancellor also abolished the additional 45% rate of tax, likewise taking effect from April 2023.
- National Insurance – 1.25 percentage point rise in National Insurance contributions is to be reversed from 6 November.
- Health and Social care Levy – to be introduced from April 2023, has been scrapped.
- Dividends – from April 2023 the government is reversing the 1.25 percentage point increase to the rate of income tax on dividends which took effect in April 2022.
- Stamp Duty - the nil rate band will be doubled from £125,000 to £250,000. First-time buyers will pay no stamp duty up to £425,000, and the value of the property on which first-time buyers can claim relief increases from £500,000 to £625,000. This tax cut took effect from midnight today (Friday 23 Sept 2022). The devolved parliaments in Scotland and Wales will make their own decision on whether they will wish to make similar changes.
- Alcohol duty – to be frozen for another year.
- Pension investments – the government will change regulations to increase investment by pension funds into UK assets, benefiting savers and boosting economic growth, and incentivising investment into Britain’s science and tech companies.
- Pension tax relief – HMRC has intimated that it knows it will take time to update providers' IT systems, therefore the government has confirmed that for 2023-24, the relevant rate of tax for relief at source pension schemes, e.g. a SIPP, will be 20%. This means providers can continue to claim at 20% for all their members for the tax year 2023-24. From 2024-25 onwards, systems will need to be updated to be able to claim at the relevant basic rate of income tax for members.
Along with the proposals to cap energy costs, there are a lot of questions being raised as to the affordability of the above changes.
Only time will tell, but they'll certainly bring an element of relief to many households.
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