Mini budget update
Last Friday, Kwasi Kwarteng outlined a series of tax cuts and measures aimed at boosting economic activity. His Growth Plan was built around three key priorities: reforming the supply-side of the economy, maintaining a responsible approach to public finances and cutting taxes to boost growth, he pledged, “Our entire focus is on making Britain more globally competitive… We promised to prioritise growth. We promised a new approach for a new era. We promised to release the enormous potential of this country.”
Key tax announcements included:
- A reversal of last April’s National Insurance contribution rise was confirmed by the government. The 1.25 percentage point increase will be reversed from 6 November. The planned Health and Social Care Levy, due to replace the National Insurance rise as a new standalone tax from April 2023, has also been cancelled
- A reduction in Stamp Duty Land Tax (SDLT) in England and Northern Ireland, raising the residential nil-rate threshold from £125,000 to £250,000, with immediate effect, and First Time Buyers Relief from £300,000 to £425,000. He also increased the maximum amount that an individual can pay for a home while remaining eligible for First Time Buyers’ Relief, from £500,000 to £625,000. As SDLT is devolved in Scotland and Wales, the Scottish and Welsh Governments will receive funding through an agreed fiscal framework to allocate as they see fit
- A cut in the basic rate of Income Tax to 19% in April 2023 – one year earlier than previously planned. At present, people in England, Wales and Northern Ireland pay 20% on annual earnings between £12,571 and £50,270; different rates apply in Scotland. The highest rate of Income Tax (the ‘additional rate’ paid at 45% by those earning over £150,000) will be abolished. From April 2023 there will be a single higher rate of Income Tax of 40%
- A reversal of the 1.25 percentage point increase in Dividend Tax rates applying UK-wide from 6 April 2023, so the ordinary and upper rates of Dividend Tax will revert to 7.5% and 32.5% respectively.
UK markets and sterling have fallen following the announcement as investor concerns intensify at the prospect of a surge in government borrowing in order to fund the tax cuts. Sterling plunged to historic lows forcing the Chancellor and the Bank of England to reassure markets.
Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.