GOVERNMENT U-TURN
In his recent statement the Chancellor announced a reversal of almost all the tax measures set out in the Growth Plan announced last month. The following tax policies will no longer be taken forward:
- Cutting the basic rate of income tax to 19% from April 2023. While the government aims to proceed with the cut in due course, this will only take place when economic conditions allow for it and a change is affordable. The basic rate of income tax will therefore remain at 20% indefinitely.
- Cutting dividends tax by 1.25 percentage points from April 2023. The 1.25 percentage points increase, which took effect in April 2022, will now remain in place. It means dividends will continue to be taxed at the current rates of 8.75%, 33.75% and 39.35% for basic, higher and additional rate tax payers.
- Introducing a new VAT-free shopping scheme for non-UK visitors to Great Britain.
- The government’s Energy Price Guarantee was originally put in place for two years , to limit the price that suppliers could charge for each unit of energy. Now this will only be in place for six months, just to cover this winter.
The Prime Minister announced on 14 October 2022 that plans to increase corporation tax rates to 25% from April 2023 would be reinstated after they were reversed in the September mini-budget.
As previously planned, the following will apply from April 2023:
- Rates will now again increase to 25% for companies with taxable profits above £250,000.
- Marginal rates will apply where profits are between £50,000 and £250,000.
- Companies with profits below £50,000 will remain taxable at 19%.
The government’s reversal of the 1.25% National Insurance increase, the Health and Social Care Levy, and the cuts to Stamp Duty Land Tax, will remain, benefitting millions of people and businesses. The £1 million Annual Investment Allowance, the Seed Enterprise Investment Scheme and the Company Share Options Plan will also continue to further support business investment.
The Chancellor will publish the government’s fiscal rules and further measures, on 31 October.
Unfortunately, these changes do make it difficult to plan, and it is likely that there will be more changes coming. If you do have any questions on the impact of this on your business or your tax position, then please do get in touch with the team.
