A cut in the basic rate of income tax will be brought forward by a year. In the Spring, Rishi Sunak, when chancellor, pledged to reduce the basic rate of income tax by 1p in the pound before the end of the Parliament in 2024. Now Mr Kwarteng says this will now happen in April 2023, which the government says will benefit 31 million people with an average £170 a year reduction in tax.
However, people are facing higher bills and the higher cost of borrowing, and more people have been drawn into paying higher tax bands, because the thresholds have been frozen. What is eye-catching is that the chancellor has pledged to abolish the 45% additional rate of tax, which is paid by people who earn more than £150,000 a year, in April 2023. That is a tax saving of nearly £3,000 a year for somebody earning £200,000 annually. It means the 40% higher rate, for earnings of over £50,270, will be the top rate.
Although announced a day in advance, the reversal of an increase in National Insurance loomed large in this mini-budget. It will see the 1.25% rise in National Insurance cancelled on 6 November.
The Treasury said the change would save nearly 28 million people an average of £330 per year. However, the impact varies considerably depending on what you earn, as there are weekly thresholds for National Insurance. There is nothing to pay on the first £242 earned per week, then it is 13.25% on earnings between £242.01 and £967, and 3.25% on the rest. That means, in general, people who earn more than £12,570 a year pay National Insurance, and the more they earn, the more they will benefit from this change.
Short and sweet - the planned Corporation Tax rise up to 25%, announced by Rishi Sunak, will now be cancelled and remain at 19%.
Stamp duty holidays are often used by governments to encourage activity in the housing market. The theory is that people also spend on things like home improvements and fixtures and fittings after they move, thus boosting economic growth.
The tax affects people planning to buy a property. It only applies in England and Northern Ireland.
In detail, it means, the threshold of how much a property has to cost before stamp duty is paid has been changed from £125,000 to £250,000.
First-time buyers currently pay no stamp duty on the first £300,000, and that will be raised to £425,000. Discounted stamp duty for first-time buyers will apply up to £625,000, an increase from the previous £500,000.
As a Business Hut client, we'll keep you updated with changes to tax. Please let us know if you have an immediate questions!
If you have any other questions or we can help you with any accounts or bookkeeping support please get in touch. Email the team email@example.com or call 01858 289 189.
Thanks for stopping by,
Charlotte & The Business Hut Team