The chancellor of the exchequer, Kwasi Kwarteng, today announced their new not-so-mini “Mini-Budget”.
What did the mini-budget announce and what does it mean?
The government intends to reach an average of 2.5% rate of growth for the UK Economy
Income Tax
- The basic rate of income tax is to be cut to 19p from 20p a year early, starting in April 2023.
- What this means:
- The more you earn, the more you will save.
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The higher rate of 45% for those earning £150,000 or more is to be axed. Instead being replaced by a single higher rate of 40%.What this means:Those earning over £150,000 a year will no longer be moved to the previously planned new tax band of 45%, instead, they will remain on 40%.
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- Kwasi Kwarteng has now made a “U-Turn” on the 45% tax policy for people earning over £150,000.
- The government will now keep the 45% Tax increase for those earning over £150,00 which was previously set to disappear after the mini-budget.
- But who will pay the 45% tax bracket? The government say about 660,000 people will be affected by the 45% Tax bracket, originally estimated to save an estimated £3,000 a year for somebody earning £200,000.
- The reversal will now mean any income over £150,000 earnt will be subject to 45% Tax.
Stamp Duty
- The stamp duty land tax will be cut, with the limit raised to £250,000 or £450,000 for first-time buyers.
- What this means:
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- Stamp duty is the tax paid when you purchase a property.
- The amount of stamp duty you pay depends on the price of the property.
- Kwarteng says the move would take 200,000 people out of paying stamp duty
- This is a permanent change effective from today.
- The new rates in England are as follows:
Corporation tax
- The corporation tax rate increase has been cancelled, originally due to rise to 25%, the amount of tax you pay on your company’s profits will now remain at 19%.
- What this means:
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- The amount of tax you must pay on your profits will remain the same.
- 19p on the pound
Bankers Bonus
- The cap placed on the monetary amount of bonus Bankers can receive which was set out by EU law in 2014 will be scrapped.
- What this means:
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- Previously limiting bonuses to double the annual salary. Mr Kwarteng said this cap only led to higher annual salaries.
- Kwarteng says this will encourage global banks to create jobs in London instead of Paris, Frankfurt, and New York.
Trade Unions and strikes
- The legislation will be put in place to require unions to put pay offers to a member vote before any form of strike can take place.
- What this means:
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- This ensures strikes will only take place once negotiations have broken down with the aim to minimise disruption.
Benefits
- Stricter rules for universal credit:
- What this means:
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- People on benefits who are able to work and do not fulfil their job search requirements will have the amount of money from benefits cut.
Shopping
- The previously planned duty rate increase on beer, cider, wine, and spirits will be scrapped.
- What this means:
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- Previously, Rishi Sunak, then Chancellor of the Exchequer, announced an increase in Alcohol duty set to be introduced in 2023.
- This has today been scrapped by Kwasi Kwarteng.
- VAT-Free shopping for tourists visiting from overseas to be introduced.
Infrastructure and investment
- A new bill is to be introduced to unpick the complex planning restrictions and EU-derived laws that Kwartend says “constrain our growth”
- The pension charge cap will be reformed, allowing pension funds to invest more easily in the UK market.
- A designated 40 “Investment zones” with relaxed planning rules and reduced business taxes are to be introduced in places such as Norfolk, West Midlands, Tees Valley, and Somerset.
- IR35 rules – the rules which govern off-payroll working – will be simplified
- Annual investment allowance – the amount companies can invest tax-free, to remain at £1m indefinitely.
- New and start-up companies are able to raise up to £250,000 under a scheme giving tax relief to investors
- Share options for employees doubled from £30,000 to £60,000
Energy
- The household price guarantee will freeze households to a price cap of £2,500
- This is on top of the £400 for every household, as previously announced.
- Reduce energy bills for all businesses across the country through a wholesale energy price cap for 6 months, for all organisations.
Contact Aston Shaw today if you require any business advice following today’s announcements. We will be happy to help you understand the benefits of today’s business relief.