18 October 2022 • United Kingdom
Those readers who remember the 1980s in the UK are likely to recall (fondly or otherwise) the “Hokey Cokey”. A repetitious song in which participants are encouraged, for example, to “put your whole self in, your whole self out” prior to a timely U-turn. Avid watchers of the UK’s recent “mini-budget” series may be left wondering what’s in and what’s out after many of the original proposals lasted only a few weeks.
Well, not much. Employees and their employers will be pleased that the cuts to National Insurance contributions (“NICs”) are staying in.
In the current UK tax year (i.e., the year ending April 5, 2023, or 2022/23 for short), this means the reversal of a 1.25% NICs increase made earlier this same year and an abandonment of the Health & Social Care Levy (that was to apply for 2023/24 and beyond).
As noted below, and by contrast, the proposed reversal of the 1.25% increase in dividend tax rates has not been retained. This will therefore be a further factor when business owners compare employment tax rates with those applying to dividend income.
Planned changes to Stamp Duty Land Tax thresholds, plus first-time buyer measures, will also be made as proposed by the previous Chancellor.
While not garnering as much attention as those matters summarised above, we also note that the:
will stay in.
Corporation Tax (“CT”) is potentially one of the more (relatively speaking) confusing announcements, as the series of events started before the first mini-budget. Some commentators have referred to “Cancelling a rise” being scrapped. What is actually happening is the:
The proposed reduction in the basic rate of income tax (from 20% to 19%, from April 2023) is also out. This is delayed “indefinitely”/until economic conditions in the UK allow.
The reduction in the UK’s additional higher rate of income tax (which will stay at 45%) was already abandoned (by the previous Chancellor). Today’s announcement (by the current Chancellor) followed suit by scrapping a 1.25% cut to the highest rate of income tax applying to dividend income. The decision to scrap the additional rate applying to dividend income (from April 2023) had already been reversed.
One of the most surprising, although not necessarily headline grabbing, elements of the mini-budget was the so-called “abolition of IR35”. The abolition of IR35 was never actually proposed. It was simply proposed to move the decision-making process (as to whether the disguised employment rules should be invoked) away from the client/engager and back to the intermediary. In effect, taking the position back to pre-April 2021 in the private sector. The Chancellor announced today that this change is out, and the rules will remain as they stand.
The next instalment in this series is expected to be in the form of the Medium-Term Fiscal Plan on October 31. This could include further changes to the UK’s fiscal policy.
While UK businesses, and individuals, will welcome some of the measures announced on October 17, they will nervously await further changes and crave more certainty than has been exhibited of late.
Head of Tax
Business Development Director
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