Mini Budget – Personal and Business Taxes

At the beginning of this tax year all National Insurance rates increased by 1.25%. From 6^th November 2022 these rate increases will be reversed as follows:

– Employees NI will decrease from 13.25% to 12.0%
– Employers NI will decrease from 15.05% to 13.8%

It is expected that the rate reduction will be received directly via the employees November payroll.

National insurance payable on benefits in kind will be averaged out so the effective rate is 14.53%.

Class 4 National Insurance will be averaged out so that the rates for 2022/23 will be 9.73% and 2.73%.

In July 2022 the thresholds increased so that fewer employees paid National Insurance. There are no changes to the thresholds in this mini budget.

The primary threshold remains at £12,570. This is the rate at which employees pay National Insurance.

For full rates see https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2022-to-2023

From April 2023 the rate of income tax will reduce from 20% down to 19%. This had been announced for the following year but is now being introduced a year early.

The additional tax rate was the tax charged on income exceeding £150,000. The rate was 45% for income tax.

From April 2023 the additional tax rate will be abolished. As a result there will now be one single higher rate of 40% on income tax.

Dividend taxes will reduce by 1.25% from April 2023. This follows the reversing of the 1.25% National Insurance rate changes.

The new dividend rates from April 2023 will be:

– The first £2,000 of dividend income is tax free
– 7.5% tax rate payable by basic rate taxpayers (2022/23 rate is 8.75%)
– 32.5% tax rate payable by higher rate taxpayers (2022/23 rate is 33.75%)

NOTE: The additional tax rate on dividends is to be abolished so the highest rate will be 32.5% from April 2023 (2022/23 rate is 39.35%)

The £nil rate tax threshold is increasing from £125,000 to £250,000.

There are further reliefs for first time buyers, which means they will have no stamp duty on purchases up to £425,000.

These changes were immediate and apply to any transactions after 23^rd September 2022.

The corporation tax rate was due to increase in April 2023 to 25%.

This has now been scrapped so the rate of corporation tax will remain at the current rate of 19%.

Businesses investing up to £1 million can claim the annual investment allowance. This will remain the same for 2023 and beyond.

The limit had been expected to reduce to £200,000 from April 2023 but the £1 million will now remain in place.

Qualifying expenditure on business assets purchased up to 31^st March 2023 receive an uplift of 130%.

No announcement was made in the mini budget on these allowances. As a result it is expected that this beneficial uplift will cease from April 2023.

Tax Tip – it may be beneficial to purchase new assets (Limited companies only), before 31^st March 2023 to optimise the tax savings.

See more information on the super deduction – https://www.gov.uk/guidance/super-deduction

The rules on IR35 have not changed. It is still important for Limited companies to follow the IR35 rules which deals with disguised employment.

What has changed is that from April 2023 it will be the responsibility of the company providing the service to decide if IR35 applies. This reverses the rules back to how they were pre 2017.

Currently the employment status is decided by the contractor or end user. This is typically a public authority or large/medium sized contractor.