The chancellor announced major tax cuts on Friday as he believes that it will boost the economy. He comes with the agenda that more money should be retained with people and therefore we should be expecting more tax cuts in the future as well.
The UK is going through a period of high inflation , the Ukraine war has increased the energy prices and has fueled up the inflation. UK households are struggling to make ends meet, this is because the real incomes are falling and the unemployment has also increased because the companies are also struggling with high prices.
The mini budget is made to address these issues. Lets see what is announced in the mini budget and how it will affect you.
| Income Tax | The basic rate of income tax will be cut by 1 percentage point from April 2023 bringing it down to 19%The 45% tax rate for the “additional tax payers” (earning over £150 000) will be abolished and there will be a single higher rate of 40% |
| N.I | The increase of 1.25 percentage points in the National Insurance will be reversed in November 2022 |
| SDLT | There is an increase in the threshold to pay Stamp duty land tax from £125 000 to £250 000 from Sep 2022The threshold for the first time buyers will increase from £300 000 to £425 000 from Sep 2022 |
| Corporation Tax | ? There will be no rise in the corporation tax and the corporation tax rate will be charged at 19% |
Income tax rates:
The new income tax rates will save people money. According to treasury “this is a cut of 5 billion a year and workers,pensioners can keep more of their money with an average gain of £170 in 2023 and 2024
The tax cut together with the changes in the National Insurance will save you £167 a year if you are earning £20 000 a year according to the accountancy firm EY
Increase in the Stamp duty land tax threshold :
The increase in threshold means that the buyers of the residential property will not have to pay stamp duty land tax (SDLT) on the first £250 000 of the property’s value. In addition the maximum value of the property on which first time buyer relief can be claimed is also increased from £500 000 to £625 000. This will encourage more people to buy homes thus boosting the property market. Once they move in they spend money on improvements, renovations, extensions etc which increase the economic activity.
This will also increase the job opportunities as more people can explore new job opportunities as they might now consider buying a house near their workplace.
Corporation Tax:
If you have an incorporated business and you were thinking of changing your business structure as part of your tax planning you won’t have to do it anymore and this is going to save you time, energy and money. As now the corporation tax will remain at 19% this will attract more businesses.
If you want any more information on how the mini budget will affect your income tax, corporation tax please contact Taxaccolega and our team of accountants will help you.
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