The UK Government’s Growth Plan 2022 – Eight Key Takeaways
NOTE: The information contained in this Insight is not the latest. Please click here for the latest statement on the UK Growth Plan 2022.
Against a backdrop of rising inflation and increasing concern about a “cost of living crisis” in the UK, the newly appointed Chancellor, Kwasi Kwarteng, laid out the Government’s plans for growing the UK economy in his “Growth Plan 2022”, released 23 September 2022. This “mini-Budget” included the announcement of what will be the largest package of tax cuts implemented in the UK since the 1970s, amongst other measures.
Here are eight key takeaways:
- Corporation tax rate: The previous Government had planned to increase the corporation tax rate from 19% to 25% from April 2023 for UK resident companies making more than £250,000 of profit per year. The increase has been scrapped so the rate will stay at 19% for all UK resident companies, thereby retaining a rate which is significantly lower than the other G7 countries.
- Income tax rates: For the first time since 2008/9, the basic rate of income tax will be cut from 20% to 19% from April 2023, 12 months earlier than planned, and the additional rate of income tax of 45% for earnings over £150,000 per year will be entirely removed from April 2023. In addition, from April 2023, the ordinary and upper rates of dividend tax will be reduced to the 2021-22 levels of 7.5% and 32.5% respectively and the additional rate of tax on dividends will be scrapped entirely.
- Stamp Duty Land Tax (SDLT): A three-prong measure has been announced to help buyers of residential property: (i) the level at which a person begins paying SDLT has been doubled from £125,000 to £250,000; (ii) increasing the level at which a first-time buyer would pay stamp duty from £300,000 to £425,000; and (iii) first-time buyer relief may be accessed for homes costing less than £625,000 rather than the current £500,000. A first-time buyer in London who buys a house at the average London house price (of £543,500) is estimated to save c.£11,000 as a result.
- Seed Enterprise Investment Scheme (SEIS): From April 2023, companies will be able to raise up to £250,000 of SEIS investment (a two-thirds increase), the gross asset limit will be increased to £350,000, and the age limit will increase from 2 to 3 years. In addition, the annual investor limit will be doubled to £200,000.
- Company Share Option Plan (CSOP): From April 2023, qualifying companies will be able to issue up to £60,000 of CSOP options to employees (double the current £30,000 limit). Certain restrictions on share classes within CSOP will also be eased, more closely aligning the scheme rules with the rules in the Enterprise Management Incentive (EMI) code and widening access to the CSOP regime for growth companies.
- Off-payroll working reforms: The 2017 and 2021 reforms to the off payroll working (IR35) rules will be repealed from 6 April 2023 so that contractors working for an organisation via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and national insurance contributions.
- VAT: In an attempt to boost the British high street, a new “VAT-free” shopping scheme will be introduced (at a date as yet unspecified, following consultation on approach and design of the scheme) for non-UK visitors to the UK whereby they can claim a VAT refund (via digital means) on goods bought in the high street, airports, and other departure points which they export from the UK in their personal baggage.
- Bankers’ bonuses: In what is hoped will be a boost to the City of London, the Prudential Regulation Authority will remove the current cap on bankers’ bonuses. This cap limits remuneration of certain bank staff to 100% of their fixed pay (or 200% with shareholder approval).
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.