The new Chancellor of the Exchequer Kwasi Kwarteng gave his mini-budget in parliament on Friday which actually turned out to contain some fairly major announcements. It contained some quite unexpected changes which the government hopes will drive growth and help with the cost of living crisis.
National Insurance
As was reported on Thursday, the Chancellor confirmed that the recent rise in National Insurance will be reversed and plans for the Health and Social Care Levy have been scrapped.
This means that from 6th November, rates of National Insurance will go back to where they were before April so we will all see a bit more money back in our pay packets. The increase in the NI threshold that came into effect in July will be retained.
Income Tax
This announcement did come as a bit of surprise. There was always a plan to reduce the standard rate of income tax to 19% but that will now come from April 2023, a year earlier than originally planned.
In addition to that, the highest rate of income tax for those earning over £150,000 has been abolished so everyone earning more than £50,270 will pay 40%.
These changes mean that everyone who currently pays income tax will also see a bit more money in their pay from next April.
Corporation Tax
Another tax increase has also been cancelled. Companies were due to see their rate of corporation tax increase from 19% to 25% in April 2023 but this won’t now be happening.
Universal Credit and part time working
There will be new rules around looking for work and trying to increase earnings from January for those on Universal Credit. At the moment, anyone earning less than the equivalent of 9 hours per week on the National Living Wage has to meet regularly with a work coach and are expected to apply for new jobs or increase the hours they work at their current workplace.
From January, that will apply to anyone earning less than the equivalent of 15 hours per week with sanctions if the requirements are not complied with.
Other announcements
The Chancellor also announced that stamp duty thresholds will increase which means the cost of buying a new home will reduce.
He has also cancelled plans to increase the rate of duty on beer, cider, wine and spirits.
And finally, he said that the government will investigate setting up infrastructure and investment zones across the country where tax and planning rules could be relaxed to drive innovation and growth.
So all in all, that’s quite a lot to take in from what was billed as a ‘mini-budget’. It will also change the amount employees get to take home in their pay packets which, along with the freeze in energy costs also recently announced, may help with some aspects of the cost of living crisis.
If you’d like information on how the changes affect your employees or your overall staff costs, just get in touch.