The rapid unwinding of most of September’s so-called mini-Budget has important implications.
Gone are the days when a Chancellor made only two set piece announcements each year and, for the remaining days of the year, tax remained generally out of the headlines. 2022 has seen four Chancellors (at the time of writing) and plenty of parliamentary statements, but no formal Budget.
September and October contained a plethora of announcements and un-announcements that left even the tax nerds struggling to keep up. If you are not one of those nerds, the following list of what is and is not happening may be helpful:
- The 1.25 percentage point reduction in National Insurance Contributions (NICs) and the abolition of the Health and Social Care Levy have survived.
- Basic rate income tax (outside Scotland) will now stay at 20% ‘indefinitely’. The previous Chancellor Kwasi Kwarteng’s plan to cut the rate to 19% from 2023/24, and former plans to make the same change from 2024/25, have both been abandoned.
- The additional rate tax (45% outside Scotland) will remain.
- Dividend tax rates will stay at their current levels (8.75%, 33.75% and 39.35% for the basic, higher and additional rate bands) and will not be cut by 1.25 percentage points from next tax year as previously stated.
- The corporation tax rises legislated for in 2021 will go ahead, meaning that the main rate will rise in April 2023 from 19% to 25%, and companies with profits between £50,000 and £250,000 will face a marginal rate of 26.5%.
- The 2017 and 2021 reforms to off-payroll rules (often referred to as IR35) will not be scrapped. All but the smallest employers will continue to be responsible for determining the employment tax status of their workers and meeting the potentially large costs of making the wrong judgement.
Away from the tax arena, but nevertheless relevant here because of its cost, the Energy Price Guarantee, which originally capped average domestic utility bills at £2,500 a year until October 2024, will now end in March 2023. From April 2023, a more targeted scheme will be introduced, which Chancellor Jeremy Hunt says ‘will cost the taxpayer significantly less’.
As we have observed over the last few turbulent months, tax rules can be dizzyingly complex, making sound personal tax planning all the more crucial.
To discuss any aspect of your financial planning, contact our Sheffield based Financial Advisers on 01142 664 432 or info@smh.group
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