Turbulence in the markets in the UK and overseas, political infighting and lack of independent OBR research or illustrations has led to Kwasi Kwarteng having an extremely short term as Chancellor, now replaced by Jeremy Hunt.
Even before Kwarteng was asked to resign/decided to resign, a watering down of the measures announced in the September mini statement was bursting through, with the 45% rate of personal tax being reinstated earlier this month and the increase in corporation tax rates reinstated a few days ago.
In the 17th October announcement, Hunt unveiled further changes to the September announcements.
The full Medium-Term fiscal plan and forecast from the Office of Budget Responsibility (OBR) is due to be available on 31 October at which point Hunt may make further changes.
Businesses and markets are struggling to digest the potential impact of the turmoil in the UK government. Energy, interest rate and mortgage increases, obligations to pay back Covid loans now in effect, plus delayed tax payments, and not forgetting the impact of the ongoing situation in Russia and the Ukraine, combine to make the operating climate even more challenging…
We are encouraging our customers to be even more diligent than usual about forecasting and planning cash flow, and to work with us to send in your records as early as possible, so that you are aware of business and personal tax liabilities and can plan and make provision for those early on.
If you’d like to discuss any of the changes and how they might affect you, please contact us on info@sestiniandco.com or call 01761 241 861.
The latest changes to UK tax measures:
Personal tax rates and National Insurance
1. The basic rate of income tax will not be cut to 19p from 20p in April 2023, as was announced by Kwarteng but will remain at 20p. The cut is scheduled to happen at some point, ‘when economic circumstances allow’.
2. The top rate of 45p, currently affecting earners over £150,000 is now set to stay, it will no longer be abolished from April 2023.
3. The increase in dividends tax of 1.25% which came into effect in April 2022 was set to be reversed by Kwarteng but Hunt announced that they will remain at the higher April 2022 rates.
4. The increase in National Insurance of 1.25% will still be reversed from 6 November 2022, as previously announced by Kwarteng.
5. Changes to the IR35 tax rules governing how temporary contractors are paid will no longer simplified and the 2017 and 2021 reforms will not be repealed.
Stamp duty cuts – remain in place
6. The stamp duty threshold before stamp duty is paid has been raised to £250,000 from the current level of £125,000 with immediate effect.
Also with immediate effect: for first time buyers stamp duty is raised to £425,000 from the current level of £300,000; first time buyers will also be able to claim relief for property values from £500,000 to £625,000. These measures only apply in England and Northern Ireland, not in Wales or Scotland.
Measures for businesses
7. The rise in corporation tax in April 2023 from 19% to 25% will now go ahead.
From 1 April 2023, the rate at which companies pay corporation tax will depend on the level of their profits. From this date, the main rate of corporation tax will increase to 25% for companies whose profits exceed the ‘upper profits limit’, set at £250,000.
Companies whose profits do not exceed the ‘lower profits limit’, set at £50,000, pay corporation tax at the ‘small profits rate’, which remains at the current corporation tax rate of 19%.
8. A new scheme for 38 low tax investment zones across the UK is still likely to go ahead although was not specifically mentioned by Hunt.
9. The cap on bankers’ bonuses introduced in 2014 has been lifted from the current level of twice salary level (with the possibility to override this if shareholders agree), with Kwarteng arguing that the previous cap merely meant that remuneration was presented differently rather than capping total remuneration. No changes to this were announced by Hunt.
10. Kwarteng announced that the Annual Investment Allowance will remain at £1m permanently, rather than returning to £200,000 in March 2023 as planned. This measure allows businesses to fund plant and technology investments whilst benefitting from 100% tax relief up to the limit. This measure is set to continue.
11. A 100% guarantee for commercial bank loans for energy companies has been introduced. No changes to this were announced by Hunt.
12. Kwarteng announced that Enterprise Investment Scheme (EIS) and Venture Capital Tax (VCT) will be extended beyond 2025 and Seed EIS limits are to be increased to £250,000 from April 2023. This measure is set to continue.
13. Company Share Option Plan (CSOP) – this measure announced by Kwarteng looks set to continue, meaning that from April 2023 qualifying companies will be able to issue up to £60,000 of CSOP options to employees, rather than the previous £30,000.
14. The Energy Bill Relief Scheme for businesses is set to run for six months until April 2023, the scheme will then be reviewed with a possible new iteration after that date.
Other measures
15. The sales tax-free shopping for overseas visitors announced in September 2022 has been reversed and will no longer take place.
16. Planned increases in duty rates for beer, cider, wine and spirits will now go ahead, reversing the September 2022 announcement.
17. The previously announced energy package for households is still going ahead from October 2022 but in its current iteration is set to stop in March 2023, with a possible different scheme coming from April 2023.
How we can help
If you’re looking for some advice in relation to taxation or are grappling with other financial issues, do get in touch. At Sestini & Co we dedicate considerable time and expertise to keeping up with changing case law and legislation affecting our UK and international clients.
If you need help with any tax-related issues, contact us on 01761 241 861 or info@sestiniandco.com or make an appointment to visit us at our Somerset or central London office.
