Since the mini-budget announcement on Friday 23 September 2022, former Prime Minister Liz Truss’ government policy outlining key economic policies has been pulled apart.
After a change in Chancellor from Kwasi Kwarteng to Jeremy Hunt an ‘emergency statement’ was released on Monday 17th October to effectively replace and re-write the mini-budget. Following the fast u-turn in government policy it has now left many wondering, what are economic impacts?
Government Policy Outlined
The emergency statement from Chancellor Jermey Hunt was designed to ensure the UK’s economic stability and provide confidence in the Government’s commitment to fiscal discipline.
UK tax rates
- Income tax – the basic rate of income tax will remain at 20% until economic conditions allow for it to be cut. This had previously been due to drop from 6 April 2023 to 19%.
- Additional rates – confirmation that the ‘additional rates’ of income tax for those earning more than £150,000 per annum would remain in 2023/24. This also includes the 45% rate on non-savings income.
- Income tax on dividends – will remain at the current rates of 8.75% in the basic rate band, 33.75% in the higher rate band and 39.35% in the additional rate band. However, the UK tax rates for dividends had been due to each drop by 1.25% from 6 April 2023.
- Corporation tax – from 1 April 2023, the planned increase in corporation tax rates will come into effect from 1 April 2023. It was proposed that the corporation tax rate would remain at 19% however, some companies will go from paying 19% to 25% or 26.5%.
Additional information on policies
- IR35 (off-payroll working rules) – introduced in 2017 and 2021, IR35 will remain into 2023/24 and beyond. The compliance burden will remain with medium and large sized employers.
- Energy Price Guarantee – a review is thought to take place in April 2023 into the support for households to cap the average annual electricity and gas costs at £2,500. We had been told that households would receive this support until September 2024.
- VAT – the VAT-free shopping scheme for non-UK visitors to Great Britain will no longer be introduced.
- Alcohol duties – will no longer be frozen from 1 February 2023 and increased duties will apply.
What’s remained from the mini-budget
The following mini-budget announcements, these government policies currently remain:
- The planned 1.25% rise in NICs will not go ahead and will be reversed from 6 November 2022. The planned 1.25% health and social care levy will also be scrapped for next year.
- The annual investment allowance will remain at £1m from 1 April 2023, rather than reverting to £200,000.
- A plan is in place to introduce 40 new “investment zones” in England.
- The increased thresholds for Stamp Duty Land Tax in England and Northern Ireland will remain in place.
- The Energy Bill Relief Scheme for Business will continue to be subject to a governmental review after 31 March 2023. The Chancellor has now said that any support for businesses will be targeted to those most affected, and that the new approach will better incentivise energy efficiency.
Proposed plans
Chancellor Jeremy Hunt is set to present an update on the government’s medium term fiscal plan on 31 October. The plan is set to outline Office for Budget Responsibility forecasts along with any further changes to government policy.
Actions to take as a business owner
It is clear we are in turbulent political and economic times and as we face uncertainty you may be asking “What actions can I take as a business owner?”.
Now is a great time to look at your business’ strengths and weaknesses along with opportunities and threats. This will help you to gain a clear understanding of your business’ position in the marketplace as well as highlighting key competitors and systems in order to improve the way you operate. Don’t know where to start contact us for bespoke business advice.
It can be a good idea to determine priorities and any big issues that need to be addressed and then you can make a plan of action. With this plan in mind it is also a good idea to plan for a range of scenarios both good and bad, so that you can be flexible and adaptable about the direction your business should take.
Contact our team
Don’t sit and panic regarding what are economic impacts from the mini-budget u-turn. We’re here to help.
Whether that’s from a personal standpoint or discussing how we can help your business, we are here to provide you with support and advice during this time, take a look at our packages to see how our team can make a difference to your accounts.
