Mini Budget - September 2022

Please see the our special mini-budget newsletter

So as we are sure most of you have seen, the government dropped (what they are calling) the biggest tax cuts in a generation. Kwasi Kwarteng, has announced a string of tax cuts “to deliver the growth of the economy“. 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

1. 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).
2. 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

1. The 1.25% point increase in national insurance that has been in effect only since April this year has been reversed. This reversal will take effect 6^th November 2022.
2. The new health and social care levy which was supposed to help the NHS has now been scrapped for good.

Work and investment

1. The rise of corporation tax from 19% to 25%, scheduled to come into effect in April 2023, has been scrapped. 
2. The rules surrounding IR35 (or off-payroll working) are to be simplified - reverting to pre-2017 rules.
3. The 1.25% dividend tax increase will be reversed from April 2023
4. Regulation changes will be introduced, making it possible for pension funds to increase UK investments.
5. New and start-up companies will be able to raise up to £250,000 under a scheme giving tax relief to investors. 
6. Share options for employees increased from £30,000 to £60,000.

What else?

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

Those of our clients currently caught up in or previously caught up in IR-35 off payroll working rules should note the significant change the budget announced; returning to pre-2017 rules. This may significantly impact how employing organisations approach the IR-35 rules. At a high level:

Off-payroll working scrapped

1. From 6 April 2023, we will be back to the IR35 rules largely as they were introduced from 6 April 2000. The off-payroll working variants for the public sector (from 6 April 2017) and for large private sector organisations (from 6 April 2021) will be scrapped.
2. To be clear, the IR35 provisions will still exist. However, it will be up to the directors of intermediary companies to decide whether there would be an employment relationship between the worker and the engager, if all the intermediaries in the chain were ignored.
3. This is a surprising move as the off-payroll rules were introduced in 2017 and 2021 because HMRC was unable to adequately police the original version of IR35, and the cost of non-compliance was estimated to be £1.2bn per year. The chancellor said compliance will be kept under review, but the costings provided in table 4.2 of his Growth Plan 2022 indicate that the revenue lost per year from this change will be £1.1 bn in 2023/24 rising to £2bn in 2026/27.