Mini Budget Tax U-Turn
There was a mini budget in September that shocked the markets. The mini budget announced major tax cuts as well as confirming the energy price cap. The markets were not expecting such radical changes and reacted badly. For example the value of the pound dropped to record lows. As a result, the Prime Minister Liz Truss and the most recently appointed Chancellor, Jeremy Hunt, announced major u-turns to the mini budget. We explain what those u-turns are, what is staying, and whether you can still save tax as a company.
The basic rate of income tax was going to be reduced from 20% to 19% from April 2023. This has been cancelled indefinitely, so the same reduction that was originally planned for April 2024 has also been cancelled.
Additional Tax Rates
The mini budget planned to abolish the additional tax rates on income over £150,000. For example the 45% income tax rates. This was cancelled so the additional rates will continue.
The mini budget cancelled plans to increase corporation tax in April 2023 from 19% to between 19% and 25% depending on profits. The increase will now go ahead. Companies with annual profits (divided by associated companies) of under £50,000 or over £250,000 will pay 19% or 25% corporation tax respectively. Companies inbetween those thresholds will pay a marginal rate somewhere between 19% and 25%.
Dividend tax rates increased in April 2022 by 1.25% in line with the increase to National Insurance rates. The mini budget proposed to reverse this increase from April 2023. However, this was cancelled so they will stay at the increased rates.
Energy Price Caps
This isn’t a tax but it affects everyone. The energy price cap for all domestic accounts was going to last for 2 years from October 2022 until September 2024. However, this will only be for the most needy from April 2023. We await an announcement about who or how the new price cap will apply.
The IR35 rules for subcontractors were reverting to pre-2017 rules. This would mean that all subcontractors would decide for themselves whether or not the IR35 rules apply to them. However, this was cancelled so medium and large companies will determine whether IR35 applies to subcontractors.
Is anything staying?
- National Insurance rate reduction of 1.25% will continue to go ahead from November 2022.
- Removal of the bankers bonus cap.
- Stamp duty changes will go ahead as announced.
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