Houses of Parliament

The Mini-Budget Statement 2022: The Key Measures for Businesses

The key measures announced by the government in the Mini-Budget Statement 2022. Some announcements will have a significant impact on your business. If you have any questions, do not hesitate to contact us directly.

Here are the key measures announced by the government in the Mini-Budget Statement on Friday 23rd September.

Some of these announcements will have a significant on your business.

Changes to National Insurance in particular will require changes to your November payroll.

If you have any questions about any of these measures, do not hesitate to contact us directly and we will be happy to help you.

NATIONAL INSURANCE

The government is cancelling the Health and Social Care Levy which took effect in April 2022, initially introduced via a 1.25 percentage point rise in National Insurance contributions (NICs).

> From 6th November 2022, the government is removing the temporary 1.25 percentage point increase in NICs for the remainder of the 2022-23 tax year

> The 1.25% Health and Social Care Levy will not come into force as a separate tax from 6 April 2023 as previously planned.

This tax cut reduces 920,000 businesses’ tax liabilities by £9,600 on average in 2023-24.

For small and medium businesses, the average saving is £4,200 and £21,700 respectively in 2023-24.

Basic rate taxpayers will on average see a gain of approximately £75 in 2022-23 rising to £175 in 23-24.

For higher rate taxpayers, these figures are on average approximately £300 in 2022-23 rising to £700 in 23-24.

For additional rate taxpayers, the gain will be on average approximately £1,650 in 2022-23 rising to £3,890 in 23-24.

More information can be found here on the government’s website

From 6th November 2022:

> Primary Class 1 NICs (employees) will generally reduce from 13.25% to 12% and 3.25% to 2%

> Secondary Class 1 NICs (employers) will reduce from 15.05% to 13.8%.

Self-employed people and company directors will pay a blended rate of National Insurance – considering the changes in rates throughout the year – when they submit their annual self-assessment return.

For employers, Class 1A (paid on taxable benefits in kind) and Class 1B (paid on PAYE Settlement Agreements) NICs will be averaged over the 2022/23 tax year, so that the rate will be 14.53%.

For the Self-Employed, Class 4 NICs will be averaged across 2022/23, so the rates will be 9.73% and 2.73%.

IMMEDIATE ACTION: UPDATE YOUR PAYROLL!

It is expected that employees will receive the reduction in NICs in their November pay, so for the third time in recent months, you will need to update your payroll software to account for the changes to NICs.

If your payroll is done by Leonherman, rest assured that that change will be made for you.

If it is not, you will need to update your payroll quickly to ensure your employees receive the cut in their November 2022 pay.

Should you have any questions about the changes to NICs and how this will impact your Payroll, contact us directly and we’ll be happy to help.

CORPORATION TAX RATES

The rate of corporation tax will remain at 19% in April 2023 for the majority of companies.

The planned increase to 25% that was due to take place on 1st April 2023 will not go ahead.

The Bank Corporation Tax Surcharge will remain the same, as will the Diverted Profits Tax.

INCOME TAX RATES

From April 2023, there will be a cut in the basic rate of income tax, from 20% to 19%. This had previously been planned for April 2024.

The cut applies to annual earnings between £12,571 to £50,270.

And from April 2023, the government will also eliminate the 45% additional rate of income tax, paid by those who earn over £150,000 so that there will be a single higher rate of income tax of 40% for earnings over £50,270.

Please note, these changes will generally apply to taxpayers in England, Wales and Northern Ireland. Separate arrangement will apply in Scotland.

DIVIDENDS FOR COMPANY DIRECTORS

From April 2023, company directors who pay themselves through dividends will be better off. The government announced that:

> The dividend ordinary rate of 8.75% will reduce to 7.5%

> The dividend upper rate of 33.75% will reduce to 32.5%

> The dividend additional rate will be abolished

Note also that as corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, it will also reduce to a 32.5% charge for loans made on or after 6 April 2023.

Please also note that these changes will apply in Scotland as the rules on dividends apply to the whole of the UK.

ANNUAL INVESTMENT ALLOWANCE

The Annual Investment Allowance (AIA) enables a 100% write-off on certain types of investment in plant and machinery up to certain financial limits per 12-month period.

The current limit of £1,000,000 – which was meant to be temporary – will now remain permanently in April 2023.

From April 2023, the limit was scheduled to be reduced to £200,000 but this will no longer go ahead.

Super-deductions capital allowances were not mentioned, so it is expected that their withdrawal on 31 March 2023 will go ahead.

IR35 AND OFF-PAYROLLING REPEALED

 From 6th April 2023, the government will repeal the off payroll working rules. Workers who provide their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of NICs and tax.

The 2017 and 2021 reforms to the off payroll working rules – also known as IR35 – required the end client, and not the contractors they hire, to decide if the working relationship was a self-employed engagement or employment. So under the existing rules, the fee-paying party – typically the end client – would take the liability and the cost.

The IR35 legislation had been brought in to stop the promotion and mis-selling of disguised remuneration, but many genuinely self-employed people had argued that they were negatively impacted by the off-payrolling rules.

The government argued that the current IR35 rules created additional complexity and cost for many businesses.

ENERGY BILL RELIEF SCHEME

 On 21st September the government announced the Energy Bill Relief Scheme in an effort to cut energy bills for non-domestic energy customers.

The scheme will initially run for 6 months, and discounts will be applied to energy usage initially between 1st October 2022 and 31st March 2023.

The scheme will be available to everyone on a non-domestic contract including businesses,

voluntary sector organisations (such as charities), and public sector organisations (such as schools, hospitals and care homes).

The scheme will apply to non-domestic energy customers who are:

> On existing fixed price contracts that were agreed on or after 1 April 2022

> Signing new fixed price contracts

> On deemed / out of contract or variable tariffs

> On flexible purchase or similar contracts

Businesses do not need to take action or apply to the scheme.

The support will be automatically applied to all eligible bills. The savings for energy used in October will be seen in your October bills, which would usually be received in November.

For non-domestic energy customers, the government will provide a discount on your gas and electricity unit prices.

For all non-domestic energy users in Great Britain the government supported price has been set at:

> £211 per megawatt hour (MWh) for electricity

> £75 per MWh for gas

For comparison, wholesale costs in England, Scotland and Wales for this winter are currently expected to be around:

> £600 per MWh for electricity

> £180 per MWh for gas

If you’re on a fixed price contract/tariff which was agreed on or after 1 April 2022, you will get support if the calculated wholesale element of the price you are paying is above the government supported price. If your fixed tariff is based on wholesale prices below the government supported price, then you will not be eligible for support.

Your per unit energy costs will automatically be reduced by the relevant pence per Kilowatt Hour (p/kWh) for the duration of the scheme.

If you’re about to sign a new fixed price contract, then the relevant price reduction will be automatically applied to your bill by your supplier.

If you signed your fixed contract before 1st April 2022, then the government expects that you will not have been exposed to the recent rises in wholesale prices, so you are not eligible for support under the scheme.

If you get your energy through a landlord, heat network, or energy service company then the government expects businesses and other organisations to pass on the benefits under this scheme through to the end user in a reasonable and proportionate way.

The government will publish a review into the operation of the scheme in 3 months’ time, to inform decisions on future support after March 2023.

The review will focus on identifying the most vulnerable non-domestic customers and how the government will continue assisting them with energy costs. The review will consider:

> How effective the scheme has been in giving support to vulnerable non-domestic customers

> Which groups of non-domestic customers (by sector, size or geography) remain particularly vulnerable to energy price rises

> How to continue supporting these vulnerable customers – either by extending the existing scheme for some users, or replacing it with a different scheme

Those businesses deemed vulnerable will continue to receive support after the 6 month scheme has elapsed.

Users who are “less vulnerable to energy price increases” are encouraged by the government to use the 6 months’ support provided by the scheme to identify measures they can take to protect themselves against high energy prices.

Full details about the Energy Bill Relief Scheme and examples can be found on the government website: https://www.gov.uk/guidance/energy-bill-relief-scheme-help-for-businesses-and-other-non-domestic-customers

SEED ENTERPRISE INVESTMENT SCHEME (SEIS)

From April 2023, qualifying companies will be able to raise up to £250,000 of SEIS investment, an increase from £150,000.

To allow more companies to use SEIS, the gross asset limit will increase from £200,000 to £350,000 and the trading age for companies will increase from 2 to 3 years.

The annual investor limit will also increase to £200,000.

COMPANY SHARE OPTIONS

 From April 2023, qualifying companies will be able to issue up to £60,000 of share options to employees. The current limit is £30,000.

INVESTMENT ZONES IN ENGLAND

The government confirmed that Investment Zones will be established across the UK.

Located throughout the country, these investment zones are designed to stimulate and accelerate economic growth and rapid development through various tax incentives and a streamlined planning process.

The government is already in discussion with 38 local authorities in England to establish investment zones.

The tax incentives under consideration for businesses in designated investment zones include:

1. Business Rates– 100% relief from business rates on newly occupied business premises, and certain existing businesses where they expand in English Investment Zone tax sites.

2. Enhanced Capital Allowance– 100% first year allowance for companies’ qualifying expenditure on plant and machinery assets for use in tax sites.

3. Enhanced Structures and Buildings Allowance– accelerated relief to allow businesses to reduce their taxable profits by 20% of the cost of qualifying non-residential investment per year, relieving 100% of their cost of investment over 5 years.

4. Employer National Insurance contributions relief– zero-rate Employer NICs on salaries of any new employee working in the tax site for at least 60% of their time, on earnings up to £50,270 per year, with Employer NICs being charged at the usual rate above this level.

5. Stamp Duty Land Tax– a full SDLT relief for land and buildings bought for use or development for commercial purposes, and for purchases of land or buildings for residential developers.

Alongside these time-limited tax incentives, there will be designated development sites for housing and commercial development in the zones and planning applications for housing and commercial development will be minimised and streamlined.

The Department for Levelling Up, Communities and Housing is expected to announce more detail about Investment Zones later in the autumn.

In the meantime, more information about Investment Zones can be found on the government’s website: https://www.gov.uk/government/publications/investment-zones-in-england/investment-zones-in-england

STAMP DUTY LAND TAX (SDLT)

Changes to Stamp Duty Land Tax are effective immediately for transactions on or after 23rd September 2022 in England and Northern Ireland.

Please note, the changes do not apply to Scotland or Wales which have their own land transaction taxes.

In England and Northern Ireland, the government increased the amount that a purchaser can pay for a residential property before they become liable for Stamp Duty.

The residential nil-rate tax threshold increased from £125,000 to £250,000.

For first-time buyers, the nil-rate tax threshold increase is even more generous from £300,000 to £425,000 and the maximum amount that an individual can pay while remaining eligible for First Time Buyers’ Relief is increased to £625,000.

The government claims that as a result of these changes, 200,000 more people will be taken out of paying stamp duty altogether.

New Residential SDLT Bands:

0 – £250,000 SDLT Rate = 0%

250,001 – 925,000 SDLT Rate = 5%

925,001 – £1,500,000 SDLT Rate = 10%

Over £1,500,000 SDLT Rate = 12%

Please note, residential rates may be increased by 3% where additional residential properties are acquired.

There were no changes in relation to purchases of non-residential property.

VAT FREE SHOPPING AREAS

The government plans to introduce a new VAT-free shopping scheme for overseas visitors to Great Britain which will enable them to get VAT refund on goods bought on the high street, at airports and other departure points and exported from the UK in their personal baggage.

The scheme is likely to be introduced in 2024-2025 to help the high street and boost the retail and tourism sectors.

ALCOHOL DUTY FROZEN

Alcohol duty will be frozen from February 2023. The Treasury said the policy will save the consumer 7p on a pint of beer, 4p on a pint of cider, 38p on a bottle of wine and £1.35 on a bottle of spirits.

BANKERS BONUS CAP SCRAPPED

A cap that restricted bankers’ bonuses to two times their salaries will be scrapped by the government. The cap has been in place since 2013.

According to Financial News the move hasn’t gone down too well with bankers: “In a tough environment for banks’ bottom lines, bankers are concerned that the removal of the cap could give firms an excuse to slash base pay in a particularly lean trading environment. People think if the cap goes therefore bankers earn three times what they earn now. It’s not going to happen like that.”

ANY QUESTIONS?

We would be very happy to answer any questions you may have about the measures announced by the Chancellor.

If you have any questions please call us on: 0161 249 5040 or email: partners@leonherman.co.uk

IMPORTANT DISCLAIMER

This material is published for information only. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. No responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by Leonherman.

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