Dive into the world of PAYE investigations. Uncover the facts, implications, and insights in this informative blog
On 23 September 2022, the then Chancellor, Kwasi Kwarteng, held a fiscal event (referred to as an Emergency Budget or Mini-Budget) at which he delivered his Growth Plan 2022. Although a number of key measures were announced most have since been abandoned, including the attempt to remove the April 2023 increase in the top level of corporation tax of 25%, abolishing the 45p additional rate of income tax and reducing the basic rate of income tax from 20% to 19%. Key measures remaining include returning NICs rates to 2021-22 levels with immediate effect, dropping back down 1.25%, and the abolition of the Health and Social Care Levy (HSCL). For further details, see this Government announcement. A number of supporting documents were published at the time of the Emergency Budget by HM Treasury and by HMRC.
New Chancellor by Jeremy Hunt replaced Kwasi Kwarteng on 14 October 2022 after barely 39 days into the role having been sacked by Prime Minister Liz Truss after a disastrous backlash from his Emergency Budget announcements. The new Chancellor delivered a statement to the House of Commons at 4.30pm on 17 October at which he provided slightly more detail in respect of the Government's decision to abandon much of the Emergency Budget. It is expected that he will deliver the Goverment's Fiscal Plan on 31 October and a full Budget in Spring 2023. The Scottish Budget will be delivered on 15 December.
Measures retained from the Mini-Budget
As stated above, a reversal of the increases in NICs and abolition of the HSCL.
Increase in the SDLT threshold
The following thresholds have changed for transactions in residential property with effective dates on or after 23 September 2022:
• for all standard rate buyers the nil-rate threshold is increased from £125,000 to £250,000; and
• for first-time buyers the nil-rate threshold is increased from £300,000 to £425,000.
In addition, the Government is allowing first-time buyers to access the relief when they buy a property costing less than £625,000 (up from £500,000).
Shortly after the Mini-Budget, the Welsh Government announced changes to Land Transaction Tax (LTT), such that from 10 October 2022:
• the starting threshold for paying main residential rates of LTT is increased from £180,000 to £225,000; and
• the first tax band covers transactions from £225,000 to £400,000 taxed at 6%.
The Scottish Government has not yet announced any changes to Land & Buildings Transaction Tax.
Permanent £1m Annual Investment Allowance
The Annual Investment Allowance is to be set at £1m per year on a permanent basis.
Wider reforms to investment taxes
In the Chancellor’s statement to the House of Commons on Monday, he said that ‘we will continue with wider reforms to investment taxes’. Although there could be changes to the details of each of the schemes, this is understood to mean the Government will continue with the proposals to:
• introduce investment zones with benefits including lower taxes;
• expand the Seed Enterprise Investment Scheme; and
• expand the Company Share Option Plan.
Measures announced at the Mini-Budget but now withdrawn
Cancellation of the increase in the rate of corporation tax
It has been confirmed that, as had been proposed by the previous Conservative Government, the main rate will rise from 19% to 25% from 1 April 2023. Larger companies will therefore pay the full 25% rate, with many smaller companies paying at an effective rate between 19% and 25% on profits between £50,000 to £250,000.
Reduction in the basic rate of income tax
It was announced that the basic rate of income tax for 2023-24 will not be cut from 20% to 19% until ‘economic conditions allow for it and a change is affordable’.
Abolition of the additional rate of income tax
It was announced that the Government would not be proceeding with the abolition of the 45% additional tax rate.
Reversal of the increase in income tax on dividends
On Monday It was announced that the current 1.25% increased dividend tax rate across all tax bands will remain.
Repeal of the off-payroll working rules
It was announced that the off-payroll working (IR35) rules will be retained and not repealed.
Introduction of a VAT-free shopping scheme
It was announced that this proposal will not be going ahead.
Freeze on alcohol duty rates
It was announced that a freeze on alcohol duty rates from 1 February 2023 for a year would not be going ahead.
Net Tax Effect
It is estimated that the above policy reversals will save £32 billion per year of the £45 billion of proposed tax cuts included in the Mini-Budget. However, the Chancellor warned that ‘there remain many difficult decisions to be announced in the Medium-Term Fiscal Plan on October 31st’ which means that it could be less than two weeks before we see more tax announcements.