The new chancellor, Kwasi Kwarteng, has delivered his mini-Budget and announced a string of tax cuts to ‘deliver growth for the economy’.
Read on to find out what the announcement means for small businesses.
Cuts to National Insurance
A 1.25 per cent cut to National Insurance has been announced, reversing the tax hike Boris Johnson introduced to help fund the NHS and social care.
From April 2023, this was due to be paid through a new ‘Health and Social Care Levy’ at a rate of 1.25 per cent. Ms Truss has now scrapped this plan in favour of an economic policy that lowers taxes to grow the economy.
The National Insurance increase will be reversed on 6 November 2022.
For the self-employed who pay National Insurance through Self Assessment, this means you’ll keep more of the salary you pay yourself.
According to The Treasury, the reversal will save 28 million taxpayers an average of £330 each a year. The more people earn, the more they’ll benefit from the change.
Income tax cuts brought forward
The basic rate of income tax has been cut by 1p to the pound.
As chancellor, Rishi Sunak had promised this by 2024, but today’s announcement brings this forward to April 2023.
This means people will pay 19p (down from 20p) to the pound on everything they earn between £12,571 and £50,270.
It’s the first time the basic rate of income tax has been reduced since 2008-09 and it’s estimated to be worth a combined £5 billion (or £170 each) to 31 million taxpayers.
In a surprise announcement, the chancellor confirmed that the 45 per cent tax band for people who earn over £150,000 a year will be scrapped from April 2023.
This means anyone whose annual salary is above £50,271 will pay income tax at 40 per cent.
No increase to corporation tax
Limited companies won’t see the planned increase to corporation tax from April 2023.
Plans to raise the tax from 19 per cent to 25 per cent were proposed by Sunak in his role as chancellor, but today’s announcement sees a freeze in rates.
Corporation tax will remain at the rate of 19 per cent.
At a glance – what else was announced in the mini-Budget?
Alongside cuts to National Insurance and income tax, the chancellor announced a permanent cut to stamp duty.
This means property buyers will pay no stamp duty on the first £250,000 of a property purchase (up from £125,000), while first-time buyers will only pay stamp duty on properties over £425,000 (up from £300,000).
Here’s an overview of some of the other measures announced:
pension fund investments will be unlocked
the bonus cap for city bankers has been scrapped
the introduction of minimum service levels by law to reduce strike actions in industries like the rail sector
overseas shoppers will benefit from VAT-free shopping
the Bank of England will remain financially independent
- The often controversial IR35 off-payroll rules are to be scrapped from April 2023
expansion of the Enterprise Investment Scheme