
Wow! What a turbulent few weeks it's been - both politically and economically - since our last #Insights feature at the end of September.
After assuming position and delivering his ill-received 'Mini-Budget', the former chancellor, Kwasi Kwarteng, soon retreated on his headline 45p tax rate cut and in a dramatic escalation, was duly shown the door along with his plans to freeze corporation tax at 19%.
Step forward our new Chancellor of the Exchequer, Jeremy Hunt, who has promptly set about dismantling most of his predecessors grand designs on future UK fiscal policy - Going full Starsky & Hutch, Mr Hunt reached for the handbrake and pulled a u-ey!
So, to ensure our readers are clear on the current state of play following a chaotic October, we've put together a useful update on the changes and what remains of the ill-fated 'Mini-Budget':
Amended Measures
Corporation Tax
From April 2023, the rate of corporation tax will rise sharply to 25% for any company with profits exceeding £250,000.
Any company with taxable profits between £50,000 and £250,000 will pay tax on a marginal rate, sliding scale basis between 19% and 25%.
For companies generating profits under £50,000, the current 19% rate will still apply.
Income Tax
The current top rate of income tax (being 45% levied on income of £150,000 or more) will remain in place for the foreseeable future.
In addition, the basic rate of income tax for England and Northern Ireland will remain at 20% indefinitely.
In Scotland and Wales, the Scottish rate of Income Tax and Welsh Income Tax rates will continue to apply.
Dividend Tax
Plans to reduce dividend tax rates by 1.25% from April 2023 have been scrapped.
As such, dividends will continue to be taxed at 8.75% and 33.75%, for basic-rate and higher-rate taxpayers, respectively.
Retained Measures
Annual Investment Allowance
From April 2023, the 'AIA' limit had been set to reduce back down to £250,000 per year.
However, the limit will now remain at £1,000,000 per year, for the foreseeable future.
National Insurance
In April 2022, National Insurance rates were increased by 1.25% until April 2023.
From April 2023, this increase would then continue at the same level under a new Health & Social Care Levy.
However, not only did Mr Kwarteng confirm cancellation of the new levy, he also announced the 1.25% rate increase would be reversed from November 2022.
This means that from November 2022 onwards, the NI rates will be:
Class 1 Employee's NI - 12%
Class 1 Employer's NI - 13.8%
Class 4 NI (Self-Employed) - 9%
The Class 2 NI (Self-Employed) rate was unaffected by the previous increase and therefore is not subject to change in this announcement.
Where NI is calculated monthly, employees will see these changes take effect in their first payroll after 6th November 2022.
Where NI is calculated annually, such as for company directors and the self-employed, revised annualised rates will be applied. These rates will be announced at a later date.
Energy Bills
Prior to the Chancellor's Mini-Budget, Business Secretary - Jacob Rees-Mogg - announced the government's Energy Bill Relief Scheme, which gave more detail around plans to support businesses with rising wholesale energy prices.
Under this scheme, the government will provide a discount on wholesale gas and electricity prices for all UK businesses through a 6 month period from 1st October 2022 to 31st March 2022.
As such, during this period, businesses in Great Britain (not Northern Ireland) will receive government discounted pricing as follows:
£211 per megawatt hour (MWh) for electricity
£75 per MWh for gas
For context, wholesale costs in England, Scotland and Wales for this winter are currently expected to be around £600 per MWh for electricity and £180 per MWh for gas.
For clarity, businesses do not need to contact their energy supplier as the discount will be applied automatically to bills.
As recommended in our previous post , if you have any questions or queries around these updated tax changes, we would suggest speaking with your company accountant or a qualified tax professional.
Equally, some of these adjustments may lead businesses to recalibrate investment plans and review business finance requirements.
If this applies to your company, please don't hesitate to get in touch - From asset finance to invoice finance, business loans to commercial mortgages, we're experts in all things business funding!
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