Mini-Budget Update

Friday’s so-called ‘mini budget’ included an array of tax cuts which will be welcome news for business owners and higher earners.

Whilst the Government said it was trying to stimulate the economy, the markets reacted poorly in the face of significant criticism that the measures are beneficial only to the few and have the potential to drive further inflation.

Here’s a reminder of the key aspects of the announcement:

Corporation tax

The planned increase in corporation tax from 19% to 25% for larger companies next April, has been cancelled. The government had faced severe criticism for the planned increase as it was thought to unfairly impact smaller businesses.

National insurance

The temporary increase (1.25%) in employee’s and employer’s National Insurance (NIC) will be withdrawn from 6th November 2022, and the Health & Social Care Levy will not be introduced in April 2023 though the higher thresholds introduced will remain.

Dividend tax

The 1.25% increase in dividend tax rates introduced earlier this year is being reversed in April next year.

Income tax on earnings

The basic rate of income tax, currently 20%, will reduce to 19%. The additional rate, applying over £150k, of 45% will be dropped, and 40% will be the top rate of tax. These changes will come into effect in April 2023.

Capital taxes

There are no changes to mainstream rates of capital taxes, but schemes such as SEIS are being made more generous. It is also likely there will be more changes in areas such as venture capital trusts.

Annual investment allowance

There had been plans to reduce the annual investment allowance but this will remain at £1m in the hope that it will stimulate investment in and by UK business.

Stamp duty

The nil rate band for stamp duty has been doubled to £250,000, with the aim of stimulating the housing market.

Investment zones

Investment Zones will be established, benefitting from a variety of measures including reduced or exempt Stamp duty, Employer’s NIC, and amendments to planning rules, reduced rates of business tax.

Summary

It’s worth reinforcing, of course, that the Xentum portfolios remain focussed on diversification and the global picture away from any short-term domestic noise in the UK.

If you have any questions as a result of the mini budget, please do not hesitate to get in touch with our financial planning team.