Mini-Budget 2022

Mini Budget update – How it affects you and your business

Today’s fiscal event was positioned as a statement to provide immediate support to get the UK “growing, working and building”. Liz Truss has two aims for her fiscal plan which are to cut taxes and grow the economy. But has today’s mini budget and the other announcements on the lead up to this fiscal event gone far enough for you and your business?

In this blog we cover today's announcements and the announcements made prior to the fiscal event that will affect you and your business.

 

Corporation tax cuts

Liz Truss promised to make the UK competitive and had previously said that having the highest taxes in 70 years and putting up corporation tax at a time when we are trying to attract UK investment would not deliver economic growth. So, today’s announcement to cancel the Corporation Tax increase previously planned was no surprise. This means that Corporation Tax will remain at its current rate of 19%, which is great news for business owners.

 

Annual Investment Allowance (AIA)

More good news for business owners that are planning investments in plant and machinery was the announcement that the Annual Investment Allowance will remain at £1m.

The AIA was due to fall to £200,000 from 31^st March 2023, so this means that businesses can now plan capital investments in plant and machinery next year and benefit from the 100% tax relief on investments up to £1m.

 

Super Deduction

The Super Deduction, this remains at 130% first-year relief on qualifying plant and machinery up until 31 March 2023.

 

Investment zones

The Chancellor announced the creation of a network of low-tax, low-regulation investment zones. The government are in discussion with 38 local authorities in England. For the full list of these, click here.

In these zones, planning rules will be relaxed to encourage industrial, commercial and residential development and taxes will be cut for 10 years to incentivise investment.

Amongst the help and reliefs on offer in these zones, the Chancellor outlined:

• Accelerated tax reliefs for structures and buildings.
• 100% tax relief on qualifying expenditure in plant and machinery.
• No stamp duty land tax (SDLT) on purchases of qualifying commercial / business premises.
• No business rates on newly occupied business premises.
• No Employer NI payments on the first £50k of any new employees’ earnings.

These benefits could have a significant impact on businesses that are involved in developing these areas and businesses moving into these zones.

 

VAT

The only change to VAT announced was the introduction of VAT free shopping for overseas visitors. There are plans to replace the old paper-based system with a modern digital one. However, when this will happen is unclear as it was announced that this would be in place “as soon as possible”.

 

National insurance

It was announced that the planned 1.25% rise in National Insurance will be reversed from 6 November. It will cover Class 1 (both employee and employer), Class 1A, Class 1B and Class 4 (self-employed) NICs.

 

Health & social care levy

The government are also axing a planned levy to fund health and social care. This means most employees will get a tax cut in their November salaries, with some only getting it in December or January due to changes needed in payroll software.

HMRC had previously requested that employers and software developers include a temporary generic message on payslips for the tax year (2022 to 2023) to explain the reason for the NICs uplift. This message will not be applicable from 6 November 2022, and it should be removed from payslips with effect from this date.

 

Income tax

A huge announcement today for higher earners was the decision by the Chancellor to abolish the 45% additional rate of income tax from 6^th April 2023. There will now only be a single rate of higher income tax at 40%. The basic rate of income tax will also be cut to 19% from 6^th April 2023.

 

Dividend tax

The planned 1.25% increase in dividend tax for the self employed and business owners has also been scrapped from the 6^th April 2023.

 

IR35

The IR35 reforms in the past few years affecting off payroll working have been incredibly controversial, adding complexity and cost to many businesses that employ contractors. The rule changes have also seen complexity for contractors.

So, it was surprising today that the Chancellor announced that they will repeal the 2017 and 2021 reforms. 

 

Stamp Duty Land Tax (SDLT)

Great news for the property & construction industries, property investors and individuals were the announcements on Stamp Duty Land Tax.

From immediate effect, the following changes will happen:

• The main threshold increased from £125k to £250k.
• First Time Buyers threshold increased from £300k to £425k.
• First Time Buyers Relief Threshold increased from £500k to £625k.

 

Seed Enterprise Investment Scheme & Company Share Option Plans

The Chancellor made some references to increase limits on the Seed Enterprise Investment Scheme and Companies Share Option plans. More details will follow on this.

 

Tax simplification

For many years, business leaders have been crying out for tax simplification, so it’s interesting today that the Chancellor announced the winding down of the Office of Tax Simplification (OTS) and will place the responsibility for simplifying the tax regime to every tax official within government. It will be interesting to see what this achieves in the long term.

 

Red tape & EU Law

The Chancellor announced that there will be a drive for government departments to review, replace or repeal retained EU law. We will need to wait and see what difference this makes to businesses.

 

Innovation

The Chancellor announced that £500 million would be provided to support new innovative funds and attract billions of additional pounds into UK science and technology scaleups. We don’t currently know the detail on this announcement, more detail will follow.

 

Announcements prior to the mini budget

 

Real Living Wage

Many companies have volunteered and committed to pay the Real Living Wage to employees. It was announced prior to the fiscal event that this would rise by £1 to £10.90 across the UK and by 90p to £11.95 in London.

The 10.1% rise is the biggest rise in the scheme’s 10-year history and has been brought forward from November. However, with other business costs rising, this may mean many companies will struggle to afford it.

 

Energy bills

Energy bills for businesses will be cut by around half their expected level this winter with the announcement this week of a huge government support package earlier this week.

The scheme means that wholesale gas and electricity prices for businesses will be fixed for 6 months from the 1^st October. It’s worth noting that it is the base / wholesale cost that will be fixed, however your energy supplier will also add on additional charges, such as standing charges etc.

The scheme will apply to companies which had agreed fixed deals at higher prices on or after 1 April. Those on variable and flexible tariffs will also be eligible.

Businesses don’t need to contact their energy suppliers as the discount will automatically be applied to their bills. It’s expected savings will be seen from October, but probably won’t be received until November.

It is understood that the scheme will be reviewed after three months, and the government may opt to extend this support for ‘vulnerable businesses’. However, it is not yet known which sectors will be included in the vulnerable category.

For many businesses this gives them hope of surviving the winter, however the price hike for most businesses on their energy bills will still be huge. Many energy intensive industries such as manufacturing may still see many businesses close due to their increased energy costs. These measures may give businesses in sectors such as hospitality and leisure a fighting chance to make it through the winter and the crucial Christmas period.

However, many businesses are asking for more. With support packages only running until April, it makes it impossible for many businesses to plan ahead and could paralyse longer term decision making in many businesses.

Some businesses have already made plans to cut production, make staff redundant or close premises permanently or for periods over the winter and these announcements may not change those plans, as businesses can’t plan for the longer term still.

If you are a landlord with tenants that pay all-inclusive bills, you need to be aware that new laws will be introduced to ensure you pass the energy cost discounts you receive onto your tenants.

 

Summary

The announcements prior to the mini budget and in today’s statement have been welcomed by many businesses. Some of the measures do provide longer term certainty for businesses and longer-term tax incentives. However, with so many external factors at play and energy costs for businesses only reduced for 6 months, it remains difficult for businesses to make long term plans.

If you have any questions about today’s announcements or planned changes, then please contact us at our offices in Liverpool, Wirral and Chester.

 

USEFUL LINKS:

Chancellor announces new Growth Plan with biggest package of tax cuts in generations - GOV.UK (www.gov.uk)

The Growth Plan: Factsheet on cancellation of National Insurance rise and Health and Social Care Levy - GOV.UK (www.gov.uk)

The Growth Plan 2022: Factsheet on Investment Zones - GOV.UK (www.gov.uk)

The Growth Plan 2022: Factsheet on Corporation Tax - GOV.UK (www.gov.uk)

The Growth Plan 2022: Factsheet on Stamp Duty Land Tax - GOV.UK (www.gov.uk)

The Growth Plan 2022: Factsheet on Income Tax - GOV.UK (www.gov.uk)