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UK Growth Plan ('Mini-Budget') 2022 - key tax highlights


September.28.2022

On 23 September 2022, the UK Government announced a number of significant tax changes in its Growth Plan (widely referred to in the media as a ‘Mini-Budget’). Here are ten key takeaways, of particular relevance to our practice:

  1. Corporation Tax: remaining at the current rate of 19%, rather than increasing to 25% from 1 April 2023 as had been previously announced.

  2. Income Tax: (i) removal of the 45% additional rate of income tax (and removal of the 39.35% / 38.1% additional rate for dividends) from 6 April 2023, (ii) reduction of the basic rate of income tax from 20% to 19% from 6 April 2023 (rather than 6 April 2024 as had been previously announced), and (iii) reversal of the previous 1.25% increase to income tax rates on dividends, from 6 April 2023.

  3. NICs / Health and Social Care Levy: reversal of the temporary 1.25% increase in NICs rates from November 2022, and cancellation of the previously announced new Health and Social Care Levy.

  4. EIS / SEIS / VCT: EIS and VCT to be extended beyond 2025, notwithstanding the previously announced ‘sunset clause’; certain SEIS limits to be increased to make the regime more generous.

  5. Off-Payroll Working / IR35: previous reforms to be repealed, such that, from 6 April 2023, workers in the UK providing their services via an intermediary (e.g. a personal service company) will be responsible for determining their employment status and paying the appropriate amount of tax and NICs. The language used here is noteworthy: whereas previous changes to the tax code have often been justified by referring to the risk of avoidance, the shift in focus here stands out, with the Government noting a wish to minimise “the risk that genuinely self-employed workers are impacted by the underlying off-payroll rules”.

  6. Capital Allowances: Annual Investment Allowance (which provides 100% relief on certain qualifying expenditure on plant and machinery) to remain at £1m, rather than dropping to £200k as previously announced.

  7. SDLT: increase in the nil-rate threshold from £125k to £250k (and from £300k to £425k for first time buyers).

  8. Windfall tax: no announcement regarding any changes to the existing ‘windfall’ tax regime (Energy Profits Levy) that was introduced in May 2022 in relation to the profits of oil and gas companies operating in the UK and the UK Continental Shelf.

  9. CGT: no announcement regarding any changes to CGT rates. There has been speculation over recent years about a possible increase to CGT rates (to harmonise with income tax rates), but there was no announcement about this in the Growth Plan and in view of the tone of the other announcements it seems safe to assume that this is not currently on the Government’s agenda (albeit in light of the current market and political volatility nothing can be ruled out).

  10. Overall reflections. The tax changes which have been announced in the Growth Plan are significant and wide-ranging. In particular, the retention of the 19% corporation tax rate, combined with the cuts to income tax and NICs, and the extensions to the EIS, SEIS, and VCT regimes, would seem to be consistent with the objective of making the UK more globally competitive, and reinforcing the UK’s reputation as a comparatively attractive jurisdiction (from a tax perspective) in which to establish a holding company and set up business operations. Of course, whether the tax cuts, combined with the resultant increased borrowing, make sense for the economy overall is the subject of separate ongoing economic and political discussion, but from a pure tax perspective the changes are likely to be welcomed by businesses, employees, and investors.

If you have any questions or would like to discuss, please contact Jonathan Rosen.

 

Update

On 17 October 2022, the UK Government announced the reversal of “almost all the tax measures announced in the growth plan three weeks ago that have not been legislated for in Parliament”.

With reference to the summary above, which outlined certain key announcements as at 23 September 2022 in the context of the Growth Plan / Mini-Budget:

  • the announcements regarding item 3 (NICs / Health and Social Care Levy), item 6 (Capital Allowances), and item 7 (SDLT) are expected to be retained, and it appears that the announcements regarding item 4 (EIS / SEIS / VCT) are also likely to be retained; and
  • the other announcements summarised above are being scrapped, and the basic rate of income tax is to remain at 20% indefinitely (rather than dropping to 19% from 6 April 2024 as had been previously announced).

The next scheduled fiscal event was expected to be the “medium-term fiscal plan” on 31 October 2022, but this has subsequently been delayed to 17 November 2022 (Autumn Statement).

If you have any questions or would like to discuss, please contact Jonathan Rosen.