Kwasi Kwarteng says his statement will provide the “biggest package in generations” of tax cuts to send a clear signal that economic growth is the government’s priority.
Here are the main points in his budget:
- Corporation tax: the proposed rise to 25% has been cancelled, keeping it at 19%.
- Annual Investment Allowance: the £1 million allowance is to remain permanent, rather than it returning to £200,000 in March 2023. This gives 100% tax relief to businesses on their plant and machinery investments up to the higher £1 million limit.
- Income tax: the basic rate of income tax is to be reduced to 19% in April 2023 – one year earlier than planned – with 31 million people getting on average £170 more per year. In a surprise move, the Chancellor also abolished the additional 45% rate of tax, likewise taking effect from April 2023.
- National Insurance: 1.25 percentage point rise in National Insurance contributions is to be reversed from 6 November.
- Health and social care levy: to be introduced from April 2023, has been scrapped.
- Dividends: From April 2023 the government is reversing the 1.25 percentage point increase to the rate of income tax on dividends which took effect in April 2022.
- Stamp duty: The nil rate band will be doubled from £125,000 to £250,000. First time buyers will pay no stamp duty up to £425,000, and the value of the property on which first time buyers can claim relief increases from £500,000 to £625,000. This tax cut took effect from midnight today (Friday 23 Sept 2022). The devolved parliaments in Scotland and Wales will make their own decision on whether they will wish to make similar changes.
- Alcohol duty: to be frozen for another year.
- Pension investments: the Government will change regulations to increase investment by pension funds into UK assets, benefiting savers and boosting economic growth, and incentivising investment into Britain’s science and tech companies.
- Pension tax relief: HMRC have intimated that they know it will take time to update provider’s IT systems, therefore the Government has confirmed that for 2023/24, the relevant rate of tax for relief at source pension schemes, e.g. a SIPP, will be 20%. This means providers can continue to claim at 20% for all their members for the tax year 2023/24. From 2024/25 onwards, systems will need to be updated to be able to claim at the relevant basic rate of income tax for members.