The government has announced its Growth Plan including many of the much-anticipated tax cuts designed to stimulate the economy.
Reversal of the Health and Social Care Levy
This was the replacement for the 1.25% increase in National Insurance Contributions which came in from April 2022. It will cease from 6 November 2022.
The additional 1.25% also applies to dividends. This will also cease but only from 6 April 2023.
Corporation tax rise changes
The rate of corporation tax was due to increase from 19% to 25% for companies from April 2023. This rise will not now happen.
The Annual Investment Allowance (AIA) for capital expenditure on qualifying plant and machinery was due to reduce from £1m to £200k from April 2023. This will not now happen and the AIA will remain at £1m indefinitely.
The scope of Seed Enterprise Investment Scheme and Company Share Option Plans has also been widened to help more companies to obtain finance and incentivise employees, respectively.
Income tax rate changes
The planned reduction in the basic rate of income tax from 20% to 19% which was due to come in from 6 April 2024 will now come in earlier, from 6 April 2023.
Gift Aid tax reclaimable by charities will be maintained at 20% until April 2027.
The 45% additional tax rate is to be removed from 6 April 2023 and additional rate taxpayers will also start to benefit from the personal savings allowance of £500 which is currently available to higher rate taxpayers.
Investment zones
The government will establish ‘investment zones’.
Businesses in designated areas in investment zones will benefit from:-
Business rates relief on newly occupied and expanded premises
Stamp Duty Land Tax relief on land bought for commercial or residential development
Zero rate employer National Insurance Contributions on salaries of new employees earning up to £50,270 per year
100% first year enhanced capital allowances for plant and machinery used in the area
Enhanced structures and buildings allowances of 20% per year.
Stamp Duty Land Tax (SDLT)
SDLT will not be payable on the first £250k (previously £125k) of the cost of purchasing a residential property.
First time buyers will not have to pay SDLT on properties costing less than £425k (previously £300k) and they will be able to take advantage of this new relief provided the cost of the property is less than £625k (previously £500k).
Off Payroll Working/IR35
The Chancellor announced plans to repeal the changes to the off-payroll working tax rules which were introduced in 2017 for public sector bodies and in 2021 for large private sector businesses. Consequently, responsibility for determining employment status under regulations IR35 in relation to engagements where the end user is in the public sector or is ‘large,’ will fall back onto the personal service company. The measures were originally introduced due to perceived large-scale abuse of the IR35 rules.
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Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.
