Chancellor Kwasi Kwarteng announced during the mini-budget delivered on the 23rd of September 2022 that the government will repeal the 2017 and 2021 off-payroll reforms. Continue reading to discover what this means for contractors and the other critical announcements unveiled during the mini-budget.
2017 and 2021 IR35 reforms repealed
The Growth Plan sets out the first steps in taking the complexity out of the tax system. One of the key steps announced was to repeal the 2017 and 2021 reforms to the off-payroll working rules (also known as IR35). From the 6th of April 2023, workers providing their services via an intermediary, such as a Personal Service Company, will once again be responsible for determining their employment status and paying the correct amount of tax and National Insurance (NI).
Other Key Announcements
Please visit the government’s website to view the Growth Plan and other key announcements delivered as part of the mini-budget.
Income Tax Cuts
The Chancellor announced that the 45% additional income tax band for those earning more than £150,000 would be removed entirely. The 40% tax rate will be applied to any income above £50,271. Kwarteng also announced plans to cut the basic income tax rate from 20% to 19% from April 2023.
National Insurance reverse and Health & Social Care Levy scrapped
On Thursday the 22nd of September, Chancellor Kwasi Kwarteng announced that April’s 1.25% NI would be reversed. The 1.25% increase was part of the previous Chancellor’s plan to fund the NHS and social care in the UK. It was due to last for one year, after which a new 1.25% Health & Social Care Levy would be collected, and NI rates would reduce to their pre-1.25% increase thresholds. However, from the 6th of November 2022, the Chancellor has announced that the 1.25% increase to NI will be reversed, and the Health & Social Care Levy will be scrapped.
Business Tax Cuts
The Chancellor announced that next year’s increase in corporation tax from 19% to 25% will be cancelled and remain at 19%. Reversing the tax rise is expected to put £19bn a year back into the economy, and Kwarteng says companies can use this to “reinvest, create jobs, raise wages, or pay dividends which support our pensions”.
From the 6th of April 2023, the dividend tax rate increase of 1.25% will be reversed and will revert to 7.5% for basic-rate taxpayers and 32.5% for higher-rate taxpayers. Additional-rate dividend tax will also be scrapped to align with removing the additional rate of income tax.
Bankers Bonus scrapped
The cap on bonuses for certain financial services executives, previously limiting the bonus to 100% of salary, is to be removed.
Stamp Duty Land Tax changes
The Chancellor announced that Stamp Duty Land Tax would be permanently cut effective from the 23rd of September 2022. As part of the new tax changes, there is no stamp duty to pay on the first £250,000 of a property’s threshold. The threshold for first-time buyers will also rise to £425,000, and the maximum property value for first-time buyers’ relief will increase to £625,000.
Investment Zones
The Chancellor confirmed that almost 40 investment zones would be created with business tax breaks. Areas including the West Midlands, Tees Valley, Norfolk and the west of England are being considered.
Industrial Action
Trade unions will be required to put pay offers to a vote of members before they can ballot for strike action. The intention is that a strike can only be called once pay negotiations have broken down.
Universal Credit requirement changes
More than 100,000 people claiming universal credit will be required to take active steps to find a better-paid job, increase their work hours, and regularly meet with their Work Coach – or face reduced benefits. Currently, those working up to 9 hours a week at National Minimum Wage are required to meet regularly with their Work Coach – this will be expanded to those working 12 hours a week and to those working 15 hours a week from January 2023.
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