As we all know, inflation is historically high, intensified by ever increasing energy costs. On Friday, chancellor Kwasi Kwarteng announced the biggest package of tax cuts in decades as part of the government's mini-budget, just a day after the Bank of England warned the UK might already be in a recession.
Our summary details key announcements from the Chancellor’s speech and also looks beyond the headlines to the less-publicised changes and how they are most likely to impact your business and your personal finances.
Key Takeaways:
1. Basic Income Tax Rate > Reduced by 1%
(paid on earnings between £12,500-£50,000)
Top Income Tax Rate > Cut from 45% to 40%
(paid by those earning over £150,000)
Impact?
Basic-rate taxpayers will save up to £750 a year and additional-rate taxpayers’ Income Tax bills are significantly reduced.
2. Planned Rises in Corporate Tax Scrapped > Sticking at 19%
Impact?
Previous announcements stated the rate of corporation tax would increase to 25% from April 2023; however, corporation tax will now remain at 19% for most companies (significantly lower than the rest of the G7 and lowest in the G20).
3. Stamp Duty Scrapped on Homes up to £250,000
Threshold has risen to £425,000 for First-Time Buyers
Impact?
If you're buying your next main home, these changes mean you'll end up paying less stamp duty (in the majority of cases).
4. Caps on Energy Bills Confirmed
Impact?
The Energy Bill Relief Scheme will cut energy prices for businesses with fixed contracts and will be applied to energy usage. Businesses are not required to take action or apply for the scheme, support will be automatically applied to bills.
5. Capital Allowances on Plant & Machinery Made Permanent
100% Write-Off through the Annual Investment Allowance (AIA)
Impact?
The limit has been £1 million for some time but was scheduled to reduce to £200,000 from April 2023. The temporary £1 million ‘super-deduction’ level will now become permanent for companies investing in qualifying plant and machinery until March 2023. Businesses can now time their acquisitions to optimise cash flow.
Charles & Dean Comments
“Markets quickly reacted to the proposed changes with the value of sterling dropping dramatically to a record low against the dollar. Speculation over an emergency increase to the Bank of England base rate in order to protect sterling were rife and reflected in the increased swap rate. The turmoil created has forced some lenders to retract products.
We anticipate increased cost of funds across our panels and are working efficiently to assist those with ongoing transactions.”
Simon Grace
Co-founder & Director at Charles & Dean