Kwasi Kwarteng’s ‘new era’ budget announces biggest tax cuts for 50 years as the Government goes for growth

The new chancellor began his announcement with the promise that the government was never going to let households face soaring energy bills caused by Vladimir Putin’s war in Ukraine, telling people “help is coming” with the rising cost of living.

However, Kwarteng’s mini budget was far from just an announcement of the energy price guarantee and £400 grant.

It has a number of major tax cuts and economic measures aimed at shaking up the economy and incentivising investment in the UK.

The chancellor’s £45 billion worth of tax cuts, equating to about 1.5 per cent of GDP, makes it the biggest tax-cutting event since 1972.

Summary of key points:

TAXES

• The 45p top rate of income tax, which affects 629,000 people who earn more than £150,000 a year, is to be scrapped. These top rate taxpayers will now pay the higher rate of 40%. This excludes Scotland which has different rates.
• The basic rate tax is to be reduced by 1p. This had been promised by former Chancellor Rishi Sunak for 2024 but Kwarteng is bringing forward to 2023.
• Stamp duty in England and Northern Ireland is reduced. The threshold for stamp duty on house purchases has been raised from £125,000 to £250,000 from tonight. For first-time buyers it will rise from a £300,000 threshold to £425,000. The value of the property on which first-time buyers can claim relief has been raised from £500,000 to £625,000.
• The cap on bankers’ bonuses has been scrapped in the belief that it limits London’s competitiveness as a financial centre.
• The 1.25% rise in National Insurance, that was introduced in April 2022 in order to fund health and social care, is cancelled from November.
• The planned increase in corporation tax from 19% to 25% is scrapped, and will make the UK’s corporation tax the lowest in the G20.

OTHER BUSINESS SUPPORT

• There will be a four-year transition period for Gift Aid relief to maintain the basic rate relief at 20 per cent until April 2027 to support charities.
• A digital VAT-free shopping scheme will be introduced for international tourists outside of airports to support the retail and tourism sectors.
• Forty investment zones will be created with tax breaks for businesses.
• Alcohol duty will be frozen from February 2023. This is a tax cut worth £600 million and will save the consumer 7p on a pint of beer, 4p on a pint of cider, 38p on a bottle of wine and £1.35 on a bottle of spirits.
• The annual investment allowance for businesses will be permanently set at its highest level of £1 million from April 1 next year. This will give 100 per cent tax relief to businesses on their plant and machinery investments up to the level of £1 million.
• The company share option plan limit that allows businesses to offer employees share options is being raised from £30,000 to £60,000.
• The seed enterprise investment scheme has been widened and this includes firms being able to raise £250,000 under the scheme, an increase of 66%.

For further detail, read our latest Tax Enews here.

Some of these key changes may have an impact on you and your business and so if you need advice please contact us.