The arrival of a new Prime Minister and a new Chancellor means the arrival of a new budget. It’s being referred to as a mini-budget but it’s still packed full of interesting content. Here is a simple guide to the key points.
The SDLT threshold is increased
SDLT (Stamp Duty) will now only be payable on properties costing more than £250K or £425K for first-time buyers. Previously the threshold was £125K and £300K for first-time buyers.
There are numerous potential reasons why new Chancellor Kwasi Kwarteng may have made this generous move. Possibly the most obvious one, however, is the way house prices forged ahead during the SDLT holiday. The Chancellor may also have his eye on general inflation. This may not affect all prices equally but could still push up house prices.
Raising the SDLT threshold will help to lower the transaction costs of buying a home. It should therefore help to keep the wheels of the property market turning. This is good news for everyone, including renters.
The National Insurance increase is reversed
The National Insurance increase was vocally backed by previous Chancellor Rishi Sunak.n He viewed it as an essential move to bring the UK’s finances back under control after the pandemic. The raise was, however, equally vocally opposed by many other people. These opponents saw the increase as, effectively, a tax on jobs, implemented at a particularly bad time.
With Rishi Sunak gone from office, his successor Kwasi Kwarteng had the opportunity to draw a line under past decisions. By doing so, he has put his own stamp on the office of chancellor. In other words, he has effectively made a statement that he is his own person, not just Rishi Sunak’s successor.
Income Tax cuts are made further and faster
Just before he left office, previous Chancellor Rishi Sunak promised to deliver a 1p in the pound cut to the base rate of Income Tax by the end of the current parliament (2024). Incoming chancellor Kwasi Kwarteng has gone further. The promised cut will now come in April 2023. Furthermore, the 45%-rate Income Tax will be abolished. This will leave the 40%-rate band as the highest rate of Income Tax payable in England and Wales.
Businesses get tax relief
Kwasi Kwarteng has also abandoned the plan to increase Corporation Tax from 19% to 25%. While this move will surely be welcomed, it only has real-world relevance to businesses that actually make profits. Cutting National Insurance and Income Tax may help with this by giving people more disposable income.
In itself, however, it may not be enough to rescue businesses struggling with rising costs. It is possible that there will be further assistance offered. Some of this may be general and some targeted. For example, Liz Truss has already indicated that she is open to relaxing immigration controls to help ease the ongoing labour shortage.
Additionally, he has announced that he will repeal the intended update to IR35. In a nutshell, this plan will relieve many private businesses of the need to try to figure out whether a contractor should be classed as an employee for tax purposes.
The chancellor’s move does not address all of the many issues relating to IR35. In particular, it does not address the use of IR35 in the public sector. It is, however, still a very welcome move. It may also be the start of further changes in this area.
Bankers get uncapped bonuses
The decision to lift the cap on bankers’ bonuses is an interesting one. On the one hand, the move could grate on people struggling with the cost-of-living crisis. On the other hand, it could make the UK more attractive to the international finance community, especially paired with the reduction in Income Tax. This could turn out to be an astute move if it boosts the UK’s post-Brexit financial sector.
