UK Mini-Budget 2022

The Chancellor announced significant changes to tax rates in his ‘UK mini-budget 2022’. Let’s take a look at some of the main points.

UK Mini-Budget 2022 for Employees and the Self Employed

For employees and the self-employed, last year’s increase in national insurance contribution rates was reversed and there are cuts to income tax rates coming in from April 2023

National Insurance Contributions

National insurance rates for employees, employers and the self-employed, will be cut from November. This will reverse the 1.25 percentage point rise in national insurance contributions, which took effect earlier this year. It will be reversed on 6 November 2022 for the rest of the 22/23 tax year.

The cut will cover Class 1 (both employee and employer), Class 1A, Class 1B and Class 4 (self-employed). This, along with the increase in July 2022 to the standard personal allowance of £12,570 for NICs means paying less NIC than in the last tax year.

Health and Social Care levy

The Chancellor also announced the cancellation of the Health and Social Care levy as a separate tax due to be introduced from April 2023.

The 1.25 percentage point increase to income tax on dividends, which was announced alongside the Health and Social Care Levy will be reversed from April 2023.

Income tax

The one percentage point cut in the Basic Rate of Income Tax (from 20% to 19%) which was planned for April 2024 will now take effect from April 2023. This will be the first cut to basic rate tax in 15 years.

UK Mini-Budget 2022 for Businesses

The reversal of the employer’s NIC rates and abolishing the planned increase in corporation tax rates in April 2023 will be welcomed by businesses.

Corporation tax rate

The government has now cancelled the planned increase to Corporation Tax. Rather than rising to a maximum of 25% from April 2023, the rate will remain at 19% for all companies.

Tax relief on capital expenditure

The Chancellor confirmed that the £1m Annual Investment Allowance will now become permanent.

The allowance, which gives 100% relief for certain capital expenditure, was temporarily increased to £1m p.a. but was due to return to £200k p.a. in April 2023.

IR35 – Off-payroll workers

The 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023.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 national insurance contributions.

Investment zones

Businesses in areas designated as investment zones will benefit from 100% business rates relief on newly occupied and expanded premises.

They will also receive:

full stamp duty land tax relief on land bought for commercial or residential development, and;
a zero rate for Employer National Insurance contributions on new employee earnings up to £50,270 per year.

There will be a 100% first-year enhanced capital allowance relief for plant and machinery used within designated sites and accelerated Enhanced Structures and Buildings Allowance relief of 20% per year.

The Chancellor announced discussions are current with devolved administrations and local partners to deliver this opportunity to drive local growth in Scotland, Wales and Northern Ireland.