Insights

Andrew Robins

Published 30 September 2022
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September 2022 Mini Budget Summary

Last week’s mini-budget and “Growth Plan” is continuing to attract headline attention, but while economists argue over whether it contained a viable strategy, what do the bulk of the budget provisions mean for business owners, entrepreneurs and employees? In this post, we take a quick look at the main provisions.

National Insurance

The Chancellor confirmed what we already knew, namely that the planned 1.25 % increase in National Insurance will be reversed from 6 November 2022 (not in April 2023 as planned). The planned Health and Social Care Levy of 1.25% has also now been cancelled.

Income Tax

It was announced that the additional rate of income tax (set at 45% on income over £150,000) would be abolished from next April and replaced with a single higher rate of income tax at 40%. However, this provision has since been retracted by the government following external pressure.

From April 2023, the basic rate of income tax will be reduced to 19 % as opposed to 20 %.

Dividends

The 1.25 % rise in income tax on dividends originally introduced as part of National Insurance increases has also been reversed from 6 November 2022.

Pension charge cap

There wasn’t much said about pensions other than that the government will bring forward draft regulations to reform the pensions regulatory charge cap.

Corporation tax

The Chancellor confirmed that the scheduled increase in the main rate of corporation tax to 25% will not be brought in from 1 April 2023. The current main rate of corporation tax will remain at 19% at all profit levels.

Investment incentives

The Enterprise Investment Scheme (EIS), which provides tax incentives for individuals to subscribe to shares in unquoted trading companies, was due to end in 2025. This scheme will now be extended for an undefined period.

The annual investment cap for the Seed Enterprise Investment Scheme (SEIS) (£100,000 per investor, £150,000 per company) will be increased from April 2023. It provides tax relief for investment in small trading companies.  

The Annual Investment Allowance (AIA) provides a 100% tax deduction for up to £1m of plant and machinery purchased in a year. This cap was due to reduce to £200,000 on 1 April 2023 but will now be kept at £1m.

Off-payroll working rules

Unexpected but welcome news came with the announcement that the IR35 off pay-roll provisions will be reversed from April next year. You can read our summary of this here. Reversal of IR35

Bankers’ bonus cap

Receiving much media attention was the previously leaked announcement to remove the cap on bankers’ bonuses that was first introduced in 2014. The cap fixes a banker’s bonus at no higher than 100 % of their fixed pay, or 200 % with shareholder approval. This move is justified by the government as a mechanism for making our financial services sector more attractive to overseas talent.

Company share option plans

From April 2023, qualifying companies will be able to issue up to £60,000 of company share option plan (CSOP) options, doubling the current limit. The qualification requirements for a company to be able to offer CSOPs will also be eased to allow for more generous enterprise management incentive schemes.

Investment zones

The Growth Plan included plans to establish investment zones across the country where businesses will be offered targeted and time-limited tax cuts, as well as benefitting from relaxed planning laws. Businesses in these zones will receive a zero rate for employer NI contributions on new employee earnings up to £50,270 per year, with employer NI contributions being charged at the usual rate above this level. Tax incentives for these new investment zones are stated to be time-limited and the government is already in discussion with 38 local authorities.  

Strike action

The government announced plans to introduce legislation that requires trade unions to put pay offers from employers to a vote of members to ensure that strikes can only be called once negotiations have genuinely broken down.

The Chancellor’s Mini Budget has certainly been controversial but also contains some good news for business. Some of the measures are likely to be far-reaching and if you are affected by any of the announcements, please get in touch.

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