Last week’s mini-budget was heralded as a growth plan with tax cuts across the board, although in the most part the cuts were either the cancellation of recent increases or the bringing forward of already announced cuts.
The Health and Social Care Levy
The Health and Social Care levy, introduced only a few months ago, is scrapped from 6 November 2022. This was a 1.25% increase in national insurance which was then to be a separate tax from 6 April 2023. Both employers and employees will benefit from the measure. The levy was accompanied by a similar increase in dividend tax. This will also be scrapped from April 2023, which does mean that dividends paid in 2022-23 will still be subject to the extra tax. In some circumstances, it may be worth considering delaying dividends that would have been paid in 2022-23 until after 5 April 2023, but that could just mean that 2023-24 dividends become subject to higher rate tax, so each case will need to be considered on its merits.
Corporation Tax Rise Cancellation
The previous plan was to increase corporation tax from April 2023. For companies with profits over £250,000 tax was to increase from 19% to 25% and for those with profits between £50,000 and £250,000, there were incremental increases depending on the amount of profit. These changes are now scrapped.
Income Tax
Income tax was to have been cut from 10% to 19% from April 2024. This decrease will now take place from April 2023. In addition, the 45% rate for income over £150,000 was to be abolished. However, this measure was reversed this week. Additional rate taxpayers will also now have a £500 Personal Savings Allowance in line with higher rate taxpayers.
Annual Investment Allowance
The annual investment allowance allows businesses to claim 100% deductions from their profits for any expenditure on assets. The cost of assets would otherwise be deducted over a period of years. This allowance was temporarily increased to £1m from £200,000 in January 2019 and was due to end in March 2023. The increase to £1m is now permanent.
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