The Mini-Budget Breakdown

Kwasi Kwarteng’s first ‘mini-budget’ as Chancellor of the Exchequer confirmed the cancellation of the 1.25-percentage point National Insurance Contributions increase. The rise, originally imposed by Rishi Sunak, was due to come into play from November 6th 2022.

Kwarteng said: “Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy…Cutting tax is crucial to this.”

The Chancellor also cancelled plans to separate out the National Insurance increase and rename it the Health and Social Care Levy, due to come into force in April 2023.

HMRC tells firms to update payroll software

HMRC is urging employers to ensure their payroll software systems are updated now..

  • In a statement to businesses, HMRC warned that news of this unexpected ‘in-year’ tax cut would need to be acted on quickly. This is to ensure company payroll systems are updated in time for the November pay cycle, preventing employees from making inflated NI contributions.
  • “We realise the timeline for this is tight and some employers may not be able to implement the changes in time. HMRC will be directing employees to their employers to correct any overpaid NICs (National Insurance Contributions) in the first instance,” the communication stated.

Income tax

  • The basic rate of income tax will be cut to 19p in the pound from April 2023.
  • Top 45% rate of income tax (on earnings over £150,000) will be abolished. This becomes one single higher rate of income tax of 40% from April 2023.

National Insurance

  • The 1.25-percentage point increase in NI Contributions, which came into place in April 2022 will be reversed on 6th November 2022.
  • Most workers should see the effect by the end of November 2022, however due to the complexities of some payroll software systems, there will be some employees who receive the cut backdated in December 2022 or January 2023
  • People who earn more than £12,570 a year pay National Insurance, and the more they earn, the more they will likely benefit from this change.

Corporation tax

  • Corporation tax will no longer rise to 25% (19% currently) in April 2023 as originally planned.

IR35 simplification

IR35 rules – the rules which govern off-payroll working are to be simplified.

The Chancellor committed to repealing the Off-payroll legislation, which were supposed to reform IR35.

  • The 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023.
  • From 6 April 2023, workers across the UK providing their services via an intermediary, such as contractors, will be responsible for assessing their own tax.
  • Payroll professionals will no longer be required to add ‘deemed employees’ to payroll software to account for income tax and employers National Insurance contributions. Nor will they be required to provide P60’s to any off-payroll workers at the end of 2023-24.

Stamp duty

Stamp duty, the tax paid when people buy a property in England and Northern Ireland, will be cut.

  • Nothing will be paid for first £250,000 of property’s value – double the current amount allowed.
  • The threshold for first-time buyers is to be increased from £300,000 to £425,000.
  • The value of the property on which first-time buyers can claim relief is to also go up from £500,000 to £625,000.

Energy

  • Household bills to be cut by an expected £1,000 this year with aid from the energy price guarantee and a £400 grant.
  • Millions of the most vulnerable households will receive additional payments, taking their total savings this year to £2,200.
  • Total cost for the energy package expected to be around £60bn for the six months from October.

Bankers’ bonuses

  • The cap on bankers’ bonuses is to be scrapped as part of efforts to “reaffirm” the UK’s status as a financial services hub.

Shopping

  • The UK will introduce VAT-free shopping for overseas visitors.
  • Planned increases in the duties on beer, for cider, for wine, and for spirits cancelled.
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