He may have only been in the job for 3 weeks, but on Friday 23rd September, new Chancellor Kwasi Kwarteng stood at the dispatch box and presented his ‘Growth Plan’… something that had been dubbed in the media as a ‘mini Budget’, and then turned out to not be so mini after all.
After an initial announcement the day before regarding the Health & Social Care Levy being cancelled (more on that below), and the (now fully expected) leaks of announcements the morning of the Growth Plan, it is fair to say that many weren’t expecting too many surprised from Mr. Kwarteng. However, no one seemed to be expecting his IR35 ‘rabbit in the hat’.
IR35 Reform Repealed
The background: In 2017 and 2021, IR35 rules were changed meaning that in the public, and then private, sectors, the responsibility for determining IR35 status was shifted from the worker to the client/fee payer. As a result of (some may say over) caution from many of the end clients to whom the responsibility had been shifted to, many contractors were forced to work via umbrella companies, or take contracts that clients had, perhaps overcautiously, deemed to be inside IR35.
However, today the Chancellor announced that, from 6th April 2023, this reform would be reversed in both the public, and private sector, with workers themselves, once again, being responsible for the determination of their IR35 status. It is therefore hoped that this will open back up the legitimate contracting market with more outside IR35 contracts being available.
Of course, IR35 wasn’t the only measure announced in the ‘not at all mini budget’:
Income Tax and National Insurance
• From 6th November 2022, the 1.25 percentage points increase in NICs rates (that was introduced from 6th April 2022) will be reversed.
• From 6th April 2023 (12 months earlier than originally announced), the basic rate of income tax will be reduced from 20% to 19%.
• From 6th April 2023, the additional rate of income tax (currently 45% on income over £150k) is to be scrapped entirely, meaning that the top level of income tax will be 40%.
This scrapping of additional rate tax will also apply tosavings and dividend income, meaning that the top level of dividend tax will be 32.5%.
Health & Social Care Levy Scrapped
The separate Health and Social Care Levy that was to be introduced from 6th April 2023 has been scrapped entirely. This means:
• The planned levy of 1.25% on income over the relevant NI thresholds will no longer be applied.
• The 1.25 percentage point increase in dividend tax will be reversed as of 6th April 2023.
Business Taxes
• The increase in corporation tax that was due to take place from 6th April 2023 (to 25%) has been cancelled, meaning that corporation tax will remain at 19%.
• The temporary increase in Annual Investment Allowance to £1million that was due to return to £200k as of April next year is to be made permanent.
Other Measures
• Stamp Duty Land Tax– from 23rd September 2022, the threshold for SDLT will double from £125k to £250k. The threshold for first time buyers will also increase from £300k to £425k (as well as the maximum property value on which first time buyers relief can be claimed increasing from £500k to £625k).
• Tax Simplification– The Office of Tax Simplification is to be abolished, with a mandate to the Treasury and HMRC set to focus on tax simplification themselves.
• Alcohol Duty Rates– these are to be frozen from 1stFebruary 2023.
• Bankers’ Bonuses– caps on bankers’ bonuses are to be axed.
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