Mini Budget Update

Today’s so-called ‘mini budget’ contained a series of announcements on tax and National Insurance. Here’s a summary of the key points affecting contractors.

• National Insurance – the temporary increase (1.25%) in employee’s and employer’s National Insurance (NIC) was introduced in April this year, to run until March 2023, when it was due to be replaced by the Health and Social Care Levy. In July 2022, partly due to public concerns, the thresholds at which NIC takes effect were increased, part way through a tax year. The temporary increase to both employee’s and employer’s NIC will be withdrawn from 6th November 2022, and the HSC will not be introduced next year. The higher thresholds introduced will however remain.
• 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 arrive in April 2023, much earlier than the basic rate reduction has previously been scheduled. These changes form a central part of the Governments ‘tax-cutting’ agenda.
• Corporation tax – which was due to increase next year will no longer do so, it will instead remain at 19%.
• Annual investment allowance – will remain at £1m rather than reducing as planned.
• Capital taxes – no changes to mainstream rates of capital taxes, but schemes such as SEIS are being made more generous.
• VAT – the main rates of VAT were left untouched.
• Stamp duty – the nil rate band for stamp duty has been doubled to £250,000, in an effort to stimulate the housing market.
• IR35 reforms –  introduced last year will be rpealed completely from April 2023. From that date, the old rules will apply again, meaning contractors will have to assess IR35 status themselves.
• Investment Zones – will be established, benefitting from reduced or exempt rates of Stamp duty, Employer’s NIC, and amendments to planning rules, reduced rates of business tax and various other measures.

Questions?

For further information, please contact our team on 01244 684700.

Recruitment businesses – please contact our Account Director or get in touch on 01244 684700.