September Statement 2022
The Mini-Budget statement from the new Chancellor, Kwasi Kwarteng, came as the UK continues to face considerable pressures from high inflation and substantial increases in the cost of living. Mr Kwarteng outlined a series of measures he believes will boost economic growth.
Titled a Growth Plan, there were some substantial announcements, with significant associated costs on tax cuts and energy support.
The Growth Plan makes growth the government’s central economic mission, setting a target of reaching a 2.5% trend rate.
On energy, the government has already announced an Energy Price Guarantee (with the average household paying no more than £2,500 per year for 2 years from October 2022). A six-month Energy Relief Scheme will support businesses and other non-domestic energy users, including charities and public sector organisations.
There are a number of significant changes on tax.
The Growth Plan cuts National Insurance contributions from November (reversing the 1.25% rise) and cancels the Health and Social Care Levy and next year’s planned rise in Corporation Tax, keeping it at a rate of 19%.
The Growth Plan brings forward the planned 1p cut to the basic rate of income tax (to 19p) to April 2023. It abolishes the additional rate of income tax (45p for top earners). Charities will need to review the implications of this on the tax-effective giving plans of their higher-earning donors.
Alongside these income tax changes, the government recognises the importance of Gift Aid to charities and is maintaining Gift Aid at the current level until April 2027.
From 23rd September, the threshold from which house-buyers begin to pay Stamp Duty Land Tax will be doubled to £250,000. First-time buyers will pay no stamp duty on homes worth £450,000, up from £300,000 and the maximum value of a property on which first-time buyers’ relief can be claimed will also increase from £500,000 to £625,000.
Addressing the statement in detail, key announcements included:
Energy Bill Relief Scheme – The new six-month Energy Bill Relief Scheme for businesses and other non-domestic energy users, including charities and public sector organisations (such as schools and hospitals), providing them with a discount on energy prices. (Paragraph 2.6). Further details on the scheme can be found here. The government also announced £400 support for households through the Energy Bills Support Scheme. (paragraph 2.3)
Income Tax – The Government will bring forward the 1 percentage point cut to the basic rate of income tax to April 2023, 12 months earlier than planned. This will apply to the basic rate of non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland; the savings basic rate which applies to savings income for taxpayers across the UK; and the default basic rate which applies to non-savings and non-dividend income of any taxpayer that is not subject to either the main rates or the Scottish rates of income tax. (Paragraph 3.2.1)
The additional rate of income tax will also be removed from April 2023. This will apply to the additional rate of non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland. The additional rate for savings, dividends and the default rates will also be removed from April 2023, and this change will apply UK-wide. Where rates are devolved in Scotland the Scottish Government will receive funding through the agreed fiscal framework to allocate as they see fit. (Paragraph 3.2.2)
As the additional rate of income tax will be removed current additional rate taxpayers will also benefit from the Personal Savings Allowance of £500 for higher rate taxpayers. (Paragraph 4.2.7). A HMRC factsheet on income tax is available.
Gift Aid transition period – A four-year transition period for Gift Aid relief will apply, to maintain the income tax basic rate relief at 20% until April 2027. This means in practice that charities and CASCs will continue to claim Gift Aid and GASDS at 25p for every £1 of eligible donation made between 6th April 2023 and 5th April 2027. (Paragraph 4.2.7)
Relief at Source transitional period – There will also be one-year transitional period for Relief at Source (RAS) pension schemes to permit them to continue to claim tax relief at 20%. (Paragraph 4.2.7).
National Insurance increase reversed – The 1.25% National Insurance increase introduced in April 2022 is to be reversed from 6 November 2022. (Announced on 22nd September). See HMRC factsheet for further details.
Health and Social Care Levy cancelled – The Health and Social Care Levy due to be introduced in April 2023 will be cancelled through new legislation (paragraph 3.20)
Tax Simplification – The Government has announced that instead of having a separate arms-length body oversee simplification, it will embed tax simplification into the institutions of government. It will therefore abolish the Office of Tax Simplification and set a mandate to the Treasury and HMRC to focus on simplifying the tax code. (paragraph 3.43)
Corporation tax rise cancelled -The government has committed to cancel the increase in the main rate of Corporation Tax to 25% that was due to take effect from April 2023, keeping the rate at 19% (paragraph 3.9).
Repealing off-payroll working reforms – The 2017 and 2021 reforms to the offpayroll working rules (also known as IR35) will be repealed from 6 April 2023. From this date,
workers across the UK providing their services via an intermediary, such as a personal service company, will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.(paragraph 4.20)
Stamp Duty Land Tax thresholds increased – From 23 September 2022, the government will increase the threshold above which Stamp Duty Land Tax (SDLT) must be paid on the purchase of residential properties in England and Northern Ireland from £125,000 to £250,000. The government will also increase the relief that first-time buyers can receive. From 23 September 2022, the threshold at which first time buyers begin to pay residential SDLT will increase from £300,000 to £425,000, and the maximum value of a property on which first-time buyers relief can be claimed will also increase, from £500,000 to £625,000. (paragraph 4.24)
New Investment Zones – The Government will work with the devolved administrations and local partners to introduce Investment Zones across the UK. Investment Zones aim to drive growth and unlock housing. Areas with Investment Zones will benefit from tax incentives (including certain business rates reliefs), planning liberalisation, and wider support for the local economy. (paragraph 4.1.2)
Changes to Universal Credit – The government is increasing the Administrative Earnings Threshold to 15 hours a week at National Living Wage for an individual claimant (and 24 hours a week for couples) from January 2023. (paragraph 4.30) The government will be strengthening the sanctions regime to set clear work expectations – including applying for jobs, attending interviews or increasing the hours– in return for receiving Universal Credit. (paragraph 4.31)
HM Treasury document can be seen at this link:
https://www.gov.uk/government/publications/the-growth-plan-2022-documents
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