Mini-Budget Summary

Liz Truss and her new cabinet announced their mini-budget today, which included the biggest tax cuts since 1972. Chancellor Kwasi Kwarteng hailed a ‘new era’ for the UK economy and said a major change of direction was needed. This sea change in economic policy has been met with some scepticism – the pound and UK stocks have both fallen in response. It remains to be seen if this massive shake-up of UK finances will have the desired effect. In the interim though, below is a summary of the changes being implemented and how they could potentially affect you and your finances.

INCOME TAX

From April 2023, the basic rate of tax will be cut from 20% to 19% and the 45% additional rate has been abolished – this doesn’t apply in Scotland though.

NATIONAL INSURANCE

The increase in National Insurance will be reversed from November 2022.

CORPORATION TAX

The rise in corporation tax which was due to increase from 19% to 25% in April 2023 has been cancelled.

STAMP DUTY

An immediate change in stamp duty tax means no stamp duty on the first £250,000 of the property’s value, and for first-time buyers that rises to £425,000.

VCT/ EIS & SEIS

Mr Kwarteng confirmed that the Government remains supportive of EIS and VCT’s and sees the value in extending them in the future – we’ll keep you posted on this!

IR35 RULES

In an attempt to take the complexity out of the tax system, the reforms around off-payroll working rules have been repealed. So this will put the responsibility back on the contractors and will free up time and money for businesses.

ENERGY

Freeze on energy bills, which the government claims will reduce inflation by 5 percentage points.

CALL TO ACTION

We will see how this plays out but one thing we do know is that you have the remainder of this tax year to make the most of 45% tax relief on pension contributions for those who are additional rate taxpayers. Please do get in touch now so we can check for unused pension allowances from this and previous tax years for you.

 

This publication has been prepared for information purposes only by Carrington Investment Consultants Ltd t/a Carrington Wealth Management and does not constitute financial or investment advice. The value of investments, and any income generated from them, will be affected by interest rates, exchange rates, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which it invests. Investors should be aware that the value of units may well fall as well as rise, is not guaranteed and that past performance is not a guide to future performance. Different funds carry different levels of risk and investors may not get back the full amount invested.