The new Chancellor, Kwasi Kwarteng’s first budget meeting, saw him announcing his “growth plan for entering a new era” under the new leadership of our new PM, Liz Truss.

Here is a summary of announcements that could affect you:

Corporation Tax

The planned rise in corporation tax from 19% to 25% has been cancelled, which means the new rate will remain 19% for all companies, regardless of the profit made.

Why anyone thought putting corporation tax up to 25% in this economic environment was a good idea is beyond us, so we are glad to see common sense has prevailed.

There was no mention of the super deduction being extended this is due to end in April 2023.

Income Tax 

Income tax will be cut to 19% from April next year. This means that the basic rate of income tax will fall from 20p to 19p, which is expected to benefit more than 31 million people.

It was announced that the additional rate of tax will be abolished so the highest rate of tax will be 40% not 45%.

Additional rate taxpayers still lose their personal allowance when they earn over £100,000 (making the actual tax rate they pay higher than 40%) but this reduction in the highest tax rate will still be welcome by some.

National Insurance Tax 

The recent rise of 1.25% in National Insurance tax will be reversed from 6 November, and this change will save nearly 28 million people an average of £330 per year.

Most employees will see the tax cut in their November pay, with some getting it in December, depending on the complexity of payroll systems.

Dividends Tax

To mirror the drop in the National Insurance rate the recent increase in Dividends rates will be reversed but unlike the reversal of the rise in National Insurance this won’t be until April 2023.

Similarly, the top rate of tax for dividends will be 32.5% to match the removal of this band from income tax.

Stamp Duty

Stamp duty has been cut for properties costing less than £250,000. First-time buyers will not be charged stamp duty on properties up to £425,000.

The rates are now:

  • 0%: £0 – £250,000 (£425,000 for first-time buyers)
  • 5%: £250,000 – £925,000
  • 10%: £925,000 – £1,500,000
  • 12%: £1,500,000+

The chancellor added that discounted stamp duty for first-time buyers will now apply to properties costing up to £625,000 – up from £500,000.

Energy

“The Energy Price Guarantee” will last two years. With a freeze on energy bills, wholesale energy prices will be capped for all organisations for six months from 1 October. The government claims this will reduce inflation by 5%.

VAT

There was some expectation that there would be a drop in VAT for hospitality businesses or to make energy cheaper, but this was not forthcoming.

Our thoughts

This is a welcome and surprising budget – it’s nice to finally see some action being taken to address some of the issues we are facing. Not everyone will agree, some will say it didn’t go far enough and some will say it goes too far but only time to tell.