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*This article reflects proposed changes at its time of publication and is now out of date due to subsequent Government announcements. Please click here to read what has changed.*

The new Chancellor of the Exchequer, Kwasi Kwarteng, announced some of the most significant tax changes seen in a generation as well as significant plans to overhaul business regulation and the repeal of the ‘IR35’ off payroll rules for business. 

Read on for our comprehensive summary of the key talking points from the Chancellor’s Growth Plan.  

1.25% National Insurance rise reversed   

The 1.25% increase in National Insurance, introduced by former Chancellor, Rishi Sunak, will be reversed from 6th November for employees and employers. For further details see our article here.  

Basic rate income tax cut brought forward   

A cut to the basic rate of income tax from 20p to 19p has been brought forward 12 months. The basic rate income tax will become 19% from April 2023. This will be applicable to non-dividend and non-savings income for taxpayers residing in England, Wales and Northern Ireland. For further details about income tax please see our article here. Subsequently, on 17th October, the Government reversed course and the 1% cut income tax will not now go ahead.

Additional rate of income tax abolished   

As part of the Government’s plan to reduce taxes, it had planned to also remove the additional rate of income tax of 45% from April 2023. 

However, on 3rd October the plans were dropped following widespread outcry from the public and MPs, with the then Chancellor Kwasi Kwarteng stating: “The abolition of the 45pc rate had become a distraction from our mission to get Britain moving.

“Our focus now is on building a high-growth economy that funds world-class public services, boosts wages, and creates opportunities across the country.”

Planned corporation tax increase   

A proposed increase in the corporation tax rate to 25% was orginally scrapped by the Chancellor in his mini-budget on 23rd September but the Prime Minister announced on the 14th October that the increase in rates would go ahead as orginally planned. For further details see our article here

Stamp Duty Land Tax (England & Northern Ireland only) 

From 23rd September 2022, the government will increase the threshold above which Stamp Duty Land Tax (SDLT) must be paid on the purchase of residential properties in England and Northern Ireland from £125,000 to £250,000.  

In addition, from 23rd September 2022, the threshold at which first- time buyers begin to pay residential SDLT will increase from £300,000 to £425,000, and the maximum value of a property on which first-time buyers' relief can be claimed will also increase, from £500,000 to £625,000. 

Repeal of IR35 reforms in 2017 and 2021   

The Government originally announced that the off-payroll working rules would be repealed, but subsequently changed course and on 17th October advised that no changes will now be made. The off-payroll rules will continue to apply. For further details see our article here.     

Annual Investment Allowance maintains £1m threshold   

In a bid to encourage businesses to invest and grow, the government has opted to make the temporary £1m level of the Annual Investment Allowance (AIA) permanent. This threshold was set to expire in March 2023. In doing so, firms can deduct all the costs of eligible plant and machinery up to £1m.   

Other changes affecting companies 

The Government also announced an increase in the thresholds for the Seed Enterprise Investment Scheme (SEIS) and Company Share Options Plans (CSOP’s). 

From April 2023, companies will be able to raise up to £250,000 of SEIS investment (increased from £150,000) to enable more companies to use SEIS. The gross asset limit will be increased to £350,000 and the age limit from two to three years. To support these increases, the annual investor limit will be doubled to £200,000.

From April 2023, qualifying companies will be able to issue up to £60,000 of CSOP options to employees which is double the current £30,000 limit. Other restrictions on share classes within CSOP will be eased, better aligning the scheme rules with the rules in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies.  

New Investment Zones   

The Government has commenced plans to launch new Investment Zones in collaboration with devolved administrations and local councils across the UK. Investment Zones are designed to accelerate growth, with the addition of tax incentives and a liberalisation of planning permission for key infrastructure projects. The tax reliefs “under consideration” are described as “time-limited” for a period of ten years.   

These reliefs include 100% relief on business rates for newly occupied commercial properties. Small firms will also see enhanced capital allowances of 100% for the first year against eligible expenditure on plant and machinery assets for use within Investment Zones.   

Employers will also benefit from a zero-rate on Employer NICs for new employees working on-site within an Investment Zone for at least 60% of the working week. This covers salaries up to and including £50,270 per annum. Salaries above this threshold will be charged at the level’s usual rate.

Date published 21 Sep 2022 | Last updated 20 Oct 2022

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