The Chancellor said that he wanted to break the cycle of higher taxes on capital and labour and wants a “new approach for a new era, focused on growth”, with plans to reach a trend rate of growth at 2.5%. He said that the Government’s plan is to “expand the supply side of the economy through tax and incentives reform”.
As a result, the following headlines were announced:
- Cancellation of the Health and Social Care Levy and subsequent cancellation of the increase in Employer National Insurance Contributions and dividends tax, and the interim increase in the National Insurance rate from 6 November this year.
- Basic rate of income tax to be reduced from 20% to 19% from April 2023 – one year earlier than planned.
- The higher rate tax band of 45% to be removed, leaving just a single higher rate of 40% from April 2023.
- The planned increase in the corporation tax rate from 19% to 25% next April will no longer take place – the lowest rate of corporation tax in the G20.
Annual Investment Allowance
- The first year relief threshold will remain at £1million, and not drop to £200,000 as planned, providing ongoing 100% tax relief in investments in qualifying plant and machinery up to this value.
- Increase in the property value at which Stamp Duty becomes payable from £125,000 to £250,000.
- First time buyers of property in England and Northern Ireland will not be required to pay Stamp Duty on the first £425,000 of a property purchase, up from the current £300,000, with the ability for first time buyers to claim relief on property up to £625,000 – up from £500,000.
- The current rules limiting bankers’ bonuses will be scrapped, with a new package of regulatory reforms to be set out later in the Autumn.
- The introduction of VAT free shopping for overseas visitors
- The planned increases in the duty rates on beer, cider, wine and spirits are to be scrapped
The head of UHY’s national tax group, Andrew Snowdon, provides the following commentary on the changes:
The changes represent a sharp U-turn for the Government, now under new leadership, away from the ‘higher tax, higher spending’ policies of recent years and back to the almost Lawsonesque polices of the 1980s. The concerns over how the package of tax cuts will be funded has clearly made the markets nervous, with the pound dropping further on the news.
However, leaving aside the macro-economic concerns, the tax changes are welcome news. Britain’s proposed rate of 25% for most companies paying corporation tax would have been a major disincentive for international companies to set up operations here. The retention of the 19% rate will help the UK to stay competitive at a critical time when we have barely escaped from all of the uncompetitive aspects of Brexit.
The reversal of the National Insurance and Health levies will also be greatly welcomed by all. It was an additional tax on jobs which is always hard to fathom as well as eating directly into the spending power of individuals.
Last and not least the energy price cap will provide relief to families and businesses alike and provide some light down what was looking to be a very gloomy tunnel.
We will be providing a full and detailed summary of all of today’s announcements on Monday morning to all our existing clients and contacts. If you would like to subscribe to receive this and future Budget announcements, you can do so here.
Furthermore, for a full and detailed summary of the Chancellor's announcement on 23 September, click here.
To discuss the impact of any of these changes in relation to your business or individual tax position, please contact your usual UHY adviser, or contact us through our Let’s Talk form, below, and we will ask your nearest UHY tax specialist to contact you.