Mini-budget – Summary
- October 2022
- 5 minutes
According to Kwasi Kwarteng, his announcement will offer the “largest package in generations” of tax cuts to make it crystal apparent that the government is focused on promoting economic growth.
It comes on top of initiatives to keep typical home energy costs at £2,500. The chancellor asserts that the government would never permit households to bear crippling energy costs brought on by Vladimir Putin’s conflict in Ukraine, assuring them that “help is coming” in the form of higher living expenses.
Income tax cuts
- Kwarteng declares that the 45% extra rate income tax bracket for people making over £150,000 will be completely eliminated. (this plan has now been reversed)
- The 40% higher rate that is applied to incomes over £50,271 will continue to apply.
- The basic income tax rate will be reduced by the chancellor from 20% to 19% until April 2023.
The main income tax changes predominantly apply in England, Wales and Northern Ireland.
The chancellor declares that by emphasising economic growth, “we won’t apologise.”
“In this country, the debate over redistribution has gone on for far too long. Now, we must concentrate on growth rather than merely our tax and spending policies, he argues.
- The 1.25 percentage point national insurance increase that was implemented earlier this year will be eliminated starting on November 6, according to Kwarteng.
The bankers’ bonus cap would be eliminated, according to Kwarteng, in order to “reaffirm” the UK’s position as a major financial hub.
He claims that the bonus was ineffective and that all it accomplished was to raise bankers’ base pay or to force them away of the UK and into Europe.
Business tax cuts
Kwarteng says next year’s increase in corporation tax from 19% to 25% will be cancelled. It will remain at 19%. “We will have the lowest rate of corporation tax in the G20.”
Reversing the tax increase will boost economic activity by £19 billion annually.
According to Kwarteng, businesses can use this money to “reinvest, create jobs, increase wages, or pay dividends that sustain our pensions.”
According to the chancellor, every additional tax on businesses is ultimately passed on to households as higher prices, lower pay, or a reduced rate of return on savings.
Stamp duty and other tax changes
According to media reports this week, stamp duty will be reduced for purchases of real estate in England and Northern Ireland. It is a “permanent cut,” according to the chancellor, and it will start today.
Currently, the first £125,000 of a property’s worth is exempt from paying stamp duty. The amount will increase to £250,000.
First-time buyer requirements will increase from £300,000 to £425,000.
First-time homebuyers will now be eligible for a maximum property worth of £625,000 instead of £500,000.
The chancellor has stated elsewhere that he will abolish the Office of Tax Simplification (OTS) and is requesting that each department instead concentrate on this. Other initiatives to simplify or update tax laws include:
- IR35 rules – which apply to contractors – will be simplified to remove “unnecessary complexity and cost” for businesses.
- Planned increases in duty rates for beer, wine and cider will be cancelled.
Growth and the public finances
According to Kwarteng, the government will increase the supply side of the economy through tax cuts in order to achieve its 2.5% annual economic growth goal.
Although he warns that “none of this is going to happen tomorrow,” the chancellor declares that he will change a “vicious cycle of stagnation into a virtuous circle of growth.”
Before the end of the year, Kwarteng pledges that the Office for Budget Responsibility will produce a comprehensive economic and budgetary outlook.
For the six months starting in October, the government’s energy support programme is anticipated to cost £60 billion.
Kwarteng says the government will bring forward measures to streamline regulations and remove EU-derived laws.
The chancellor says a list of key infrastructure projects will be “prioritised for acceleration” today.
The government, according to the chancellor, will pass legislation to stop “militant trade unions” from shutting down essential infrastructure through strikes.
According to him, the rules will oblige unions to put wage proposals to a vote of their members so that strikes can only be called when pay negotiations have truly broken down.
The chancellor has said that there will be roughly 40 investment zones established with tax benefits for companies.
The West Midlands, Norfolk, the Tees Valley, and the west of England are among the contenders.
“We must unleash the potential of the private sector if we are serious about moving forward.”