The New Chancellor Reverses Emergency Budget 2022 | A week is a long time in politics ... |
Posted by Roger Eddowes on 20/10/2022 @ 8:00AM The new chancellor, Jeremy Hunt, has set out his medium-term plan measures. Although we have a proper budget on the 31st of October, his recent announcement u-turned almost everything Kwasi Kwarteng announced in September ... The Chancellor has also asked Government departments to find efficiencies within their budgets! "A week is a long time in politics" is a well-known phrase meaning everything can change within a few days when it comes to Westminster, but recent events have been unprecedented. Liz Truss' growth plan is now well and truly dead.
"Is this the biggest u-turn in British economic history?"
After massive turmoil in the markets, new chancellor Jeremy Hunt reversed almost all the elements of the growth plan. At the end of October, he will announce the Medium-Term Fiscal Plan which will be yet another budget, but will be backed up by figures from the Office for Budget Responsibility as well as 'further measures' to what he already announced, which will probably mean cuts across the board.
These measures are firmly in the grip of HM Treasury again and are designed to ensure the economic stability of the United Kingdom and return to the Government's commitment to prudent fiscal discipline.
National Insurance
The 1.25% NIC increase has been cancelled from November and the Health & Social Care Levy has been scrapped. It is estimated that tax will be reduced for nearly 1m businesses next year. It will also help nearly 30m taxpayers in the UK save £300.
Income Tax
The previously announced cut in Income Tax to 19% has been scrapped for now. The Government will proceed with the cut when the time is right., but only when economic conditions allow. The 45% additional rate of Income Tax remains.
Dividends
The Government confirmed that the 1.25% proposed reduction in rates of taxation will not proceed, meaning that the rates will stay as follows:
the dividend ordinary rate - 8.75% the dividend upper rate - 33.75% the dividend additional rate - 39.35%
As corporation tax due on directors' overdrawn loan accounts is paid at the dividend upper rate, this will also remain at 33.75%. These changes will also apply in Scotland and Wales as the rules on dividends apply to the whole of the UK.
Corporation Tax
Previously, it was announced the increase to 25% would not happen, but now it will as planned. However, this is only for companies with profits over £250,000 and for those with profits below £50,000 it remains at 19%. There will be a tapered relief on profits between £50,001 and £249,999 so that implies a gradual increase rather than across the board.
Capital Allowances
The Government has announced that the temporary £1 million level of Annual Investment Allowance (AIA) will become permanent and the proposed reduction will not occur. There have so far only been minor amendments to the Super Deduction rules, so I await further clarity on this. Get your timing right if you're thinking of buying any plant and machinery.
Seed Enterprise Investment Scheme
From April 2023, SEIS increases by two-thirds to £250,000. The gross asset limit also increases to £350,000 and the age limit goes from two to three years. the Annual Investor Limit is doubled to £200,000.
Company Share Option Plan
Qualifying companies will be able to issue up to £60,000 of Company Share Option Plan (CSOP) options to employees, twice the current £30,000 limit. The 'worth having' restriction 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.
Stamp Duty Land Tax
A number of changes are made to the Stamp Duty Land Tax (SDLT). Generally, the changes increase the amount that a purchaser can pay for a residential property before they become liable for SDLT. The residential nil rate tax threshold is increased from £125,000 to £250,000.
The nil rate threshold for First Time Buyers' Relief is increased from £300,000 to £425,000 and the maximum amount that an individual can pay while remaining eligible for First Time Buyers' Relief is increased to £625,000. This all applies from the 23rd of September 2022 in England and Wales only.
The Welsh Government has also altered its rates in relation to land and buildings in Wales for transactions with an effective date on or after 10 October 2022. Higher rates may be payable where further residential properties are acquired.
IR35 and Off-Payrolling
There have been numerous changes to the tax system to try and address 'disguised employment' and to generate additional tax and NICs accordingly. It was a surprise when the Government stated that it would repeal the off-payroll working rules from 6 April 2023. However, it has been confirmed that this change will now not go ahead.
VAT-free shopping areas
The Government had announced that it would introduce a modern, digital, VAT-free shopping scheme with the aim of providing a boost to the high street and creating jobs in the retail and tourism sectors. Again, this change will not go ahead either.
Alcohol duties
The Government had announced that it would freeze alcohol duty rates from the 1st of February 2023, but this will not go ahead.
Energy bills
The Government announced unprecedented support to protect households and businesses from high energy prices. The Energy Price Guarantee and the Energy Bill Relief Scheme are supporting millions of households and businesses with rising energy costs, but only until April 2023 when it will be reviewed in line with international gas prices.
"A lot to unpack!"
There will be more to come from Jeremy Hunt on the 31st of October and it will all be costed and backed up by OBR figures. This is hoped to cool the markets and reduce the interest the Government pays on its debt.
This is not the end of the story though as Government departments will be asked to find efficiencies within their budgets and the Chancellor is expected to announce further changes to fiscal policy on 31 October to put the finances on a sustainable footing.
A week is a long time in politics, so watch this space. Until next time ... 
ROGER EDDOWES
Business Godparent
Would you like to know more? If anything I've written in this blog post resonates with you and you'd like to discover more about what the Chancellor announced and how it may affect your business, it may be a great idea to call me on 01908 774320 and let's see how I can help you.
Don't forget to stay updated with our daily social media posts on Facebook. About Roger Eddowes ... |  | | Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions. |
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