The newly appointed Chancellor of the Exchequer has announced in his Statement on 17 October 2022 that several of the UK Government’s key tax policies would be cancelled, weeks after they were proposed by his predecessor in the Mini Budget 2022 (please see our Mini Budget publication here).
With the view to increasing economic stability and confidence in the financial markets in the UK, the Chancellor promised an additional £32 billion in tax revenue. The Statement was intended to avoid speculation and give assurances on the sustainability of the Government’s finances ahead of the Medium Term Fiscal Plan, which is expected to be released on 31 October 2022. In his statement, the Chancellor also warned that he would need to make more “difficult” decisions on tax and spending before then.
Below is a summary of the key Statement announcements affecting businesses and individuals, as they stand today:
- Corporation tax: Corporation tax will no longer remain at 19% and will rise to 25% from April 2023 (a change already set in legislation).
- Off-payroll working rules (IR35): The proposed changes to the IR35 regime will no longer go ahead. In the Mini Budget, the Government announced that businesses would be freed from the requirement to determine the employment status of individuals providing services via an intermediary or a personal service company. Now, businesses will retain the responsibility to establish any income tax and national insurance contributions implications of such arrangements.
- Seed Enterprise Investment Scheme (SEIS): The SEIS scheme provides tax relief to investors in certain start-ups. The Government will continue with its plan to increase the amount companies can raise in SEIS investment from £100,000 to £250,000. Similarly, the gross asset threshold will still increase to £350,000 and the company’s “age limit” will still rise to 3 years.
- Company Share Option Plans (CSOP): The Government will proceed with its plan to expand the tax advantaged CSOP share option scheme rules. This plan anticipates that qualifying companies will be able to issue up to £60,000 in options to employees (an increase from the current £30,000).
- Annual investment allowance (AIA): The Government will continue with raising the AIA to £1 million. This means that businesses will be able to deduct 100% of costs of qualifying plant and machinery investments up to a £1 million limit.
- Income tax: The basic rate of income tax (applying to income between £12,571 and £50,270) will remain at 20%. Originally, the Government had proposed to reduce this to 19%. As previously indicated, the previously announced removal of the 45% additional rate of income tax on income over £150,000 has also been cancelled.
- Dividend rate: The 1.25% reduction to dividend rates has been cancelled. This means the dividend taxation rates will remain at 8.75% for basic taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers.
- Health and social care levy: The Government’s previous announcement that the national insurance contribution rates will be reduced by 1.25% stands. This is effective from November 2022. The Health and Social Care Levy will also be cancelled after April 2023.
- Stamp duty land tax (SDLT): The Government will continue with the stamp duty land tax changes that were proposed in the Mini Budget, as follows:
- The threshold for SDLT on a purchase of residential properties in England and Northern Ireland above which SDLT must be paid has been increased from £125,000 to £250,000.
- The threshold at which first-time buyers begin to pay residential SDLT was increased from £300,000 to £425,000.
- The maximum value of a property on which first-time buyer’s relief can be claimed has also increased from £500,000 to £625,000.