As the UK moves onto its fourth Chancellor in the space of four months, the majority of the changes in taxation announced in Kwasi Kwarteng’s “Mini-Budget” of 23rd September have been axed. As things stand, the key changes to taxation will now be as follows:
National Insurance
The increase to National Insurance (NI) to help pay for social care reforms has been scrapped. The temporary 1.25% which was added to the rates of NI for 2022/23 for employees, employers and the self-employed from 6th April 2022 will be removed from 6th November 2022.
The changes to the thresholds at which individuals (both employed and self-employed) start to pay NI, which were introduced in July 2022, will remain – these are now in line with the annual personal allowance of £12,570.
Dividend Income
The increase of 1.25% to the rate of tax on dividend income will remain, with the planned cut by 1.25% from 6 April 2023 no longer going ahead. The rates will remain at their current levels of 8.75% (basic rate), 33.75% (higher rate) and 39.35% (additional rate) on amounts in excess of the £2,000 dividend allowance.
Income Tax
Income tax rates and allowances are unchanged – a planned decrease in the basic rate of tax from 20% to 19%, first announced by Rishi Sunak to apply from 2024 and then brought forward by Kwasi Kwarteng to April 2023, is no longer going ahead. There had already been a well-publicised U-turn on the planned removal of the 45% rate of additional rate tax (on income above £150,000).
Corporation Tax
Corporation tax will increase as planned to 25% from April 2023. Small companies with profits below £50,000 will continue to pay 19% and taper relief will be introduced for companies with profits below £250,000.
IR35 Rules
IR35 off payroll working will remain in its current form, with the contracting company responsible for determining the employment status of contractors working on their behalf.
Stamp Duty Land Tax
One of the few changes to survive, no Stamp Duty will be due on purchases of residential property up to £250,000 in England and Northern Ireland on properties purchased after 23.09.2022. This doubles the previous threshold of £125,000.
For first time buyers, the threshold has increased from the previous £300,000 to £425,000, and the threshold to which first time buyers can claim relief has increased from £500,000 to £625,000.
Please note that tax rates and allowances may differ in Scotland.
This article is for information only and should not be construed as advice or a recommendation. You should always seek independent financial advice prior to taking any action.
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