The new Chancellor of the Exchequer, Kwasi Kwarteng, gave his ‘mini Budget’ statement on 23 September. Although not billed as a full Budget, to the casual observer it seemed to have more content than many actual budgets in past years. We have taken a look at what has been announced so far and, while more detail will emerge in the coming days, we set out below a few thoughts on the issues most likely to affect our clients.
The reversal of this year’s rise in National Insurance Contributions from 6 November had already been announced before the statement. Alongside that will be a reversal of the Health and Social Care Levy due to be implemented in April 2023, which will now disappear before coming into effect.
The Health and Social Care Levy was the new name for the National Insurance surcharge and also affected dividends, increasing all dividend tax rates by 1.25%. It therefore seems that the elevated dividend rates of 8.75%, 33.75% and 39.35% will apply to dividends paid during the remainder of 2022/23. From April 2023 onwards there will be no additional 1.25%, so it would make sense to push any significant dividends from owner-managed companies into 2023/24.
The Chancellor also made significant changes to income tax for 2023/24. The basic rate will drop by 1% to 19% and the additional rate of tax for income over £150,000 will be abolished. Reverting to two income tax rates will also simplify dividend tax, eliminating the additional rate taxpayers’ dividend rate. Dividends after 5 April 2023 will therefore either be taxed at 7.5% or 32.5%. Again, the message is that any significant dividends should be deferred until 2023/24.
The trust income tax rate has recently been aligned to the additional tax rate; it is not yet clear whether the trust tax rate will be reduced to 40%.
In the push for growth the allowance for investment in start-up companies via the Seed Enterprise Investment Scheme (SEIS) is to rise. The annual limit for investors will double to £200,000 and the amount that companies can raise in this way is to be increased as well.
The property market will also feel the benefit of the Chancellor’s tax cuts. The SDLT threshold is to double to £250,000, and the threshold at which first-time buyers begin to pay residential SDLT will increase from £300,000 to £425,000. Additionally, the maximum value of a property on which first-time buyers’ relief can be claimed will also increase, from £500,000 to £625,000, which could help those looking to get onto the property ladder in high value areas like London.
Finally, among the business tax changes announced, the Chancellor confirmed that the corporation tax rate will remain at 19%, rather than being increased to 25% as announced by Rishi Sunak earlier this year. For anyone with a family company, this will no doubt be welcome news.
Tax laws are subject to change and taxation will vary depending on individual circumstances