The UK Government’s Growth Plan 2022 – Where Are We Now?
NOTE: The information contained in this Insight is not the latest. Please click here for the latest statement on the UK Growth Plan 2022.
Following a highly negative response from the financial markets and the IMF, amongst others, to the UK Government’s “Growth Plan 2022” (released on 23 September 2022 by the then-new Chancellor Kwasi Kwarteng and summarised by us here) (the “Mini-Budget”), the replacement Chancellor Jeremy Hunt made an Emergency Statement on 17 October in which he announced, by way of a major Government “U Turn”, that almost all of the tax measures set out in the former Chancellor’s Mini-Budget would not now be implemented.
Here is a summary of where things stand following the re-writing of some of the key tax measures previously announced by the former Chancellor in the Mini-Budget:
- Corporation Tax rate: In the Mini-Budget it had been announced that the planned rise in the corporation tax rate to 25% would not proceed and it would remain at 19%. However, this measure has now been reversed and the corporation tax rate will rise to 25% for companies with profits of £250,000 and over from April 2023, as previously planned.
- Income Tax and National Insurance contribution rates:
- The abolition of the 45% additional rate of income tax from April 2023 which had been included in the Mini-Budget has been reversed (and so this 45% rate will remain in place).
- The Mini-Budget had also included: (a) the reduction of the basic rate of income tax from 20% to 19% from April 2023, and (b) a reversal of this year’s 1.25% increase to income tax on dividends with effect from April 2023. Neither of these proposals will go ahead.
- The planned decrease in the rate of employee and employer National Insurance contributions by 1.25% from 6 November 2022 will, however, be implemented.
- Stamp Duty Land Tax (SDLT): The measures announced in the Mini-Budget to help buyers of residential property (doubling of the nil rate band and the changes to the SDLT regime for first-time buyers), which came into effect on 23 September, will remain in force.
- Seed Enterprise Investment Scheme (SEIS): The enhancements to the SEIS scheme announced in the Mini-Budget have been retained. No further announcements were made in relation to the extension of the EIS and VCT legislation.
- Company Share Option Plan (CSOP): The increase in the number of CSOP options that can be issued to employees, announced in the Mini-Budget, has been retained.
- Off-payroll working reforms: The Mini-Budget announced the repeal of both the 2017 (public sector) and 2021 (private sector) off-payroll working rules from 6 April 2023. However, this measure has now been reversed and the IR35 and off-payroll working rules will remain in their current form.
- VAT: The plan to introduce a new “VAT-free” shopping scheme for non-UK visitors to the UK whereby they can claim a VAT refund (via digital means) will not proceed.
- Bankers’ bonuses: No mention was made in the Emergency Statement of the removal of the bankers’ bonus cap, announced in the Mini-Budget, and it is assumed that this measure will still proceed.
The Emergency Statement was light on detail, and with a medium-term fiscal plan still due to be published on 31 October alongside an official forecast from the Office for Budget Responsibility, it would not be surprising if further tax changes are announced. All UK taxpayers can do for now is “watch this space”.
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.