Budget  

The tax table: Mini-Budget devil is in the detail

The tax table: Mini-Budget devil is in the detail
Photo: Marek Piwnicki via Unsplash

A bold plan for a "new era" from chancellor Kwasi Kwarteng has come with a mass of tax cuts and subsidies.

While the quote of the day actually goes to MSP Alison Thewliss of the SNP, who responded to the 'mini-Budget' describing the new front bench as a "Thatcher-playing cosplay shambles of a government", Kwarteng has asserted: "We will have one of the most pro-growth income tax regimes in the world".

But how have these bold plans gone down with advisers and tax specialists?

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Quilter portfolio manager Paul Craig said: "You certainly have to commend the new chancellor for having the courage of conviction on his first day in school, but whether government’s energy subsidies and tax cuts will pre-empt economic growth or prove inflationary will largely depend on how these incentives are financed."

He warned as the Bank of England is likely to provide at least part of this funding through gilt selling, this could prove inflationary and therefore require offsetting BoE action.

"For consumers with borrowings they could simply lose from one hand what they receive in the other. That said, monetary growth may be offset by planned BoE quantitative tightening, a slowdown in mortgage lending and external outflows (expanding balance of payments deficit)", Craig added.

But whether any of this tax cutting will come with the intended simplification is yet to be seen, according to Robert Salter, global mobility director at Blick Rothenberg. 

Salter has expressed concern over the unravelling of the Office of Tax Simplification. He commented: "This is a disappointment and the idea that the chancellor of the exchequer, can simply automatically accept and impose tax simplification in the everyday actions of tax and treasury officials is a simple fallacy."

Here is the FTAdviser Tax Table to help provide some of the at-a-glance changes to taxation unveiled today (23 September).

 Budget October 2021Spring Statement 2022Mini-Budget September 2022

Income tax and personal allowances

-Bringing the £12,570 threshold into immediate effect. Basic rate of income tax will be cut from 20p in the pound to 19p from 2024.

Cut in the top rate of income tax from 45 per cent to 40 per cent from April 2023.

Reducing the basic rate from 20 per cent to 19 per cent from April 2023

Dividend tax

Legislation introduced in the Finance Bill 2021-22 to raise the rates of income tax applicable to dividend income by 1.25 per cent. The dividend ordinary rate will be set at 8.75 per cent, the dividend upper rate will be set at 33.75 per cent and the dividend additional rate will be set at 39.35 per cent.

 

Dividend tax rates fall to 7.5 per cent for basic-rate payers, 32.5 per cent for higher-rate payers; the 38.1 per cent for additional rate taxpayers will also be removed to align with the dividend upper rate, which is being reduced to 32.5% from 6 April 2023.

Pension allowancesNo changes to the PLA or MPAA.-Nothing on the LTA, MPAA or PLA
Capital gains taxFrom 27 October 2021, the deadline for residents to report and pay CGT after selling UK residential property will increase from 30 days after the completion date to 60 days.-Nothing in the 42-page Growth Plan
Bank levyBank corporation tax rate of 25 per cent confirmed. The rate of the surcharge to be set at 3 per cent from April 2023.-

Cap on bankers' bonuses has been removed

Inheritance taxNothing mentioned.-Nothing on IHT
Corporation taxConfirmation of rise to 25 per cent-Cutting the 25 per cent rise back to 19 per cent.
Tax on savings interestNo changes to subscription rates.-

No subscription rate changes; EIS has been extended

National Insurance contributionAs previously announced, a 1.25 percentage point hike on all workers to help pay for a new health and social care tax (see below)-

Repeal of the 1.25 percentage point NI hike in 2022

VATNo major changes.Households with energy-saving materials installed will pay 0 per cent VAT on them.No VAT for foreign visitors to the UK
Stamp Duty Land TaxNo further SDLT reliefs 

SDLT cut of up to £2,500 for properties from 23 September 2022. 

The threshold at which first-time buyers begin to pay SDLT will increase from £300,000 to £425,000, and the maximum value of a property on which first-time buyers’ relief can be claimed will also increase from £500,000 to £625,000.

Environmental taxes-

Plans to remove some of the red tape around people using alternative energy sources. 5p cut in the price of petrol per litre for 12 months.

Energy Price Guarantee will cap the unit price that consumers pay for electricity and gas. The government will deliver £150 of the saving by covering the environmental and social costs, including green levies, currently included in domestic energy bills for two years.
Business rates and RestartBusiness rates multiplier frozen from 1 April 2022 until 31 March 2023. A new temporary business rates relief for eligible retail, hospitality and leisure buildings for 2022-23. Eligible properties will receive 50 per cent relief. A new 100 per cent improvement relief for business rates, to take effect in 2023 and be reviewed in 2028. From 1 April 2023 until 31 March 2035 targeted business rate exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100 per cent relief for eligible heat networks, to support the decarbonisation of non-domestic buildings. Business rates revaluations to take place every three years, instead of five.Confirmation of the reliefs already mentioned.NI waiver for investment zones; 
Entrepreneurs' relief (Business Asset Disposal Relief)--No changes
New: Health and Social Care tax

New for 2022 and beyond, a 1.25 percentage point increase will be placed on National Insurance contributions, alongside a 1.25 per cent dividend tax, in order to pay for a £86,000 cap on the cost of social care. This will, from 2023, become a separate levy to fund social care.

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Levy to be scrapped altogether from 2023 onwards

New: Residential Property Development Tax

Government will introduce a new tax from April 2022 on the profits that companies and corporate groups derive from UK residential property development.

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New: Employment Allowance relief-

From April 2022, the allowance will increase to £5,000 and will affect half a million small businesses.

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IR35Planned changes to go ahead in 2021; 2017 changes ratified.-

"The 2017 and 2021 reforms to the off- payroll working rules (also known as IR35) will be repealed from 6 April 2023." - Growth Plan document, page 30.