Please note this content was written contemporaneously, and may well now be superseded
Update October 2022 Post Announcement – U Turns
3 October – the plan to abolish the 45% Income Tax Rate and associated Additional Rate Dividend Tax rate have now been withdrawn – these bands will remain
14 October – the planned 2023 Corporation Tax rises which the Growth Plan shelved are now reinstated. Our original briefing represents our understanding of the 2023 Corporation Tax changes
Growth Plan 2022
On Friday 23rd September 2022 HM Government published “The Growth Plan 2022“. A mini budget in all but name by the new Government.
Here is a first look at its provisions. As usual there is more unpicking to be done in coming weeks and months, so comment should be read in this context – please take advice before taking any specific course of action.
We have looked at provisions likely to effect our clients and contacts.
Context – the context, of course, is rising costs, rising energy bills, sluggish recovery from the disruption of Brexit and Covid and a new Government.
SDLT
– Increase in threshold for Residential property purchases. Nil rate threshold now £250k from £125k.
– First Time Buyers Nil Rate Threshold now £425k from £300k, and increase in maximum property value for First Time Buyers to £625k from £500k.
– No changes in SDLT rates for commercial property.
These changes apply to England only, as land taxes are devolved.
IR35 – the “reverse IR35” rules applying in the Public Sector from 2017 and Private Sector from 2021 are reversed from April 2023, with reversion back to “old” IR35 with the contractor/psc deciding status and paying taxes. A word of caution – this is not abolition of IR35, and in a sector which attracts close scrutiny from Government and Treasury, expect more changes in due course.
Income Tax
– Cut in Basic Rate Income Tax from 20% to 19% from April 2023.
– Additional Rate of 45% on income over £150k is abolished to make one Higher Rate of 40%, again from 6 April 2023.
HM Government – Income Tax Factsheet
Dividend Tax – return to their 2021/22 rates from April 2023. This means the 1.25% increment applies for one year only.
– Basic Dividend Tax Rate – 2021/22 and earlier, and 2023/24 and later – 7.5%. 2022/23 only 8.75%
– Higher Rate Dividend Tax – 2021/22 and earlier, and 2023/24 and later – 32.5%. 2022/23 only 33.75%
– Additional Rate Dividend Tax – 2021/22 and earlier, and 2023/24 and later – 38.1%. 2022/23 only 39.35% – presumably this rate will be abolished in line with the removal of Additional Rate Income Tax
– No change to £2,000 threshold.
Planning point – some 2022/23 dividends may benefit from deferral to 2023/24 however only if it keeps 2023/24 in the same rate band. Saving 1.25% and going from 7.5% to 32.5% isn’t sensible.
National Insurance and Health and Social Care Levy
– 1.25% Social Care Levy which was due to come in from April 2023 abolished.
– 1.25% increase in NI rates which came into effect in April 2022 abolished from 6 November 2022
– increased NI thresholds which came in from July 2022 following pressure on the Government are not changed. This means with the reduction in NI rates from 6th November 2022, the overall NI burden is decreasing.
HM Government – National Insurance increase reversed
HM Government – Reversal of the Health and Social Care Levy Factsheet
A word of caution. For employees NI is calculated weekly / monthly, so the reduction is effective 6th November 2022. However for the Self Employed and Company Directors NI is an annual calculation – we already had a hybrid set of thresholds in place for 2022/23 reflecting the July 2022 increase in thresholds, it now seems we will have a set of hybrid rates in place for 2022/23 to reflect the mid year cut in rates. This will take time to unpick, although decisions on Sole Trader v Partnership v Company won’t change as adjustments will largely be relative.
Corporation Tax – April 2023 Increase in Corporation Tax abolished. Corporation Tax remains at 19% regardless of profit levels. This means no change to the current Corporation Tax regime.
Annual Investment Allowance – the current temporary annual threshold of £1m is to be made permanent – it was due to reduce to £200k.
VAT – no changes in rates or thresholds. But a new VAT free shopping scheme for oversees visitors to the UK to be set up, presumably to encourage high ticket tourism.
Investment Zones – a new raft of Investment Zones to be set up with relaxed planning rules, lower business rates, lower Stamp Duty.
HM Government – The Growth Plan 2022: Investment Zones factsheet
Company Share Ownership Plan / Seed Investment Scheme – extensions to the thresholds under these schemes; our experience is they don’t really help the typical entrepreneurial business.
Comment – clearly this is a massive cut in Government revenue, with a simultaneous increase in borrowing to meet the previously announced support for domestic and business energy. On the back of the borrowing to support the country during Covid, this is a big gamble by the Government on the principles of cutting taxes to stimulate growth. If the plan works the Government will be lauded – if it doesn’t future generations will be saddled with massive public debt.