In Kwasi Kwarteng’s first Budget address, dubbed an ‘emergency Mini-Budget’, he set out the UK Government’s key policies to tackle soaring energy costs and inflation.

The Mini-Budget also comes after the Bank of England voted for a 0.5 percentage points increase in the interest rate, meaning it now stands at 2.25% (the highest level since December 2008) and represents the seventh rise since last December.

With this in mind, the Chancellor’s tax incentives and support packages are an attempt to combat the “vicious cycle of stagnation” and kick start “a virtuous cycle of growth”.

Here, we summarise all the key details from the statement, which included the biggest package of tax cuts since 1972, and the information also revealed prior to the address which may impact you and your business.

Business tax and financial support takeaways

Corporation Tax

It was announced in the March 2021 Budget that there would be a 6% increase in the
Corporate Tax main rate from 19% to 25%. However, in a move that the new Prime
Minister has said is key to helping attract investment into the UK, this has been
abandoned.

VAT

A digital, VAT-free shopping scheme to be introduced for overseas visitors in a bid to “modernise” the UK’s system.

Energy

Ahead of the Budget, Business Secretary Jacob Rees-Mogg announced a new Energy Bill Relief Scheme.

The support package will provide a discount on wholesale gas and electricity prices for all non-domestic customers whose current energy bill has been
significantly inflated. The support is equivalent to the Energy Price Guarantee put in place for households. As with the Energy Price Guarantee for households, customers do not need to take action or apply to the scheme to access the support. Support (in the form of a p/kWh discount) will automatically be applied to bills.

National Insurance

As with the corporation tax rate, it was expected that a reversal of the National Insurance (NI) hike would be confirmed, and this was the case the day prior to the Mini-Budget. It’s predicted that 920,000 businesses are set to save an average of almost £10,000 next year as a result.

Investment Zones

Local Investment Zones are to be created to encourage development and to “unleash the power of the private sector”. In these agreed areas, of which there could be almost 40 in England, taxes will be cut, and tax reliefs will be accelerated, including 100% on qualifying investment in plant and machinery, and on purchases of land for commercial use. There will be no stamp duty to pay on newly occupied business premises, and no business rates to pay in the tax zone. Employers will not have to pay NI on the first £50,000 a new employee in the tax site earns. The creation of similar Zones for Scotland, Wales and Northern Ireland will be discussed with devolved administrations.

Annual Investment Allowance

The Annual Investment Allowance (AIA) for qualifying expenditure on plant and machinery, which was originally increased to £1,000,000 in the 2018 Budget, and was due to revert to £200,000 from 1 April 2023, will instead be permanently set at £1,000,000.

IR35

From April 2023 the IR35 rules introduced for the public sector in 2017 and the private sector in 2021 will be repealed, meaning that end users of contractors engaged through the contractor’s personal service company will no longer be responsible for assessing whether the contractor should be taxed as an employee by the end user. This will revert to being the responsibility of the personal service company providing the contractor.

Personal tax and cost of living takeaways

Income Tax

From April 2023, the basic rate will be cut to 19% from next year which “means a tax cut for over 31 million people”.

Stamp Duty Land Tax

Up until today, there was no Stamp Duty Land Tax (SDLT) payable on the first £125,000 of a property’s value in England and Northern Ireland. This level has been doubled to £250,000 with effect from 23 September.

First time buyers currently do not pay SDLT on the first £300,000, but this will increase to £425,000 and the level at which they can claim relief rises to £625,000 from £500,000.

National Insurance

As above, a National Insurance (NI) increase has been reversed. The turnaround will be happening from 6 November and is largely to benefit top earners by about £1,800 a year, while those on lowest incomes while be about £7 better off. Despite criticism, Truss has insisted that this is fair. According to the Treasury, almost 28 million people will keep an extra £330 of their money on average every year.

It was also announced that the planned conversion of the NI into a new Health and Social Care Levy would be axed.

Energy

As announced a couple of weeks back, the Government is to cap household energy bills at £2,500 for two years from 1 October 2022. This cap is said to equate to an average household saving of £1,000 a year.

Excise Sector

Current alcohol duty rates are being frozen from 1 February 2023, which will provide support to the hospitality sector (heavily affected by the Covid pandemic). An alcohol duty reform document is to be published today which is intended to outline a new alcohol duty system.

The corresponding reforms are due to be implemented from 1 August 2023 and are expected to include and address:

• An 18-month easement for wine, whereby wine between 11.5% alcohol by volume (ABV) and 14.5% ABV will be taxed as if 12.5% ABV.
• The introduction of a Small Producer Relief.
• The introduction of a new Draught Relief.
• Administrative differences between different categories of alcohol, by simplifying requirements, digitising the administrative systems, and replacing regime-specific approval processes with a single alcohol approval for production.
• A new digital system is expected to be introduced to enable duty to be accounted for and paid on alcohol products and production premises on a single online return. The introduction of the new digital service is anticipated by HMRC in late 2024.

If you have any queries regarding the Mini-Budget announcements and the possible impact on you or your business, please get in touch with your usual McCole’s advisor or a member of our specialist team.