“We need a new approach for a new era”
A day after Bank Rate rose from 1.75% to 2.25%, Chancellor Kwasi Kwarteng delivered his first statement on 23 September, outlining a series of tax cuts and measures aimed at boosting economic activity and growth.
Moving straight to the pressing matter of energy costs, Mr Kwarteng reiterated steps taken to support families and businesses, including the Energy Price Guarantee, the Energy Bill Relief Scheme and the Energy Markets Financing Scheme.
With a keen growth focus, the Chancellor professed, “We need a new approach for a new era,” before announcing a Growth Plan built around three key priorities: reforming the supply-side of the economy, maintaining a responsible approach to public finances and cutting taxes to boost growth. A ‘Medium-Term Fiscal Plan’ will be outlined in the coming months and the Office for Budget Responsibility (OBR) will be publishing an economic and fiscal forecast before the end of 2022. In the meantime, the government has set a target of reaching a 2.5% trend growth rate for the UK economy, with a tax simplification theme front and centre. The key announcements were:
A reversal of last April’s National Insurance contribution rise was confirmed by the government on 22 September. The 1.25 percentage point increase will be reversed from 6 November. The planned Health and Social Care Levy, due to replace the National Insurance rise as a new standalone tax from April 2023, has also been cancelled.
Stamp Duty Land Tax (SDLT)
The Chancellor announced a reduction in SDLT in England and Northern Ireland, raising the residential nil-rate threshold from £125,000 to £250,000, with immediate effect, and First Time Buyers’ Relief from £300,000 to £425,000. He also increased the maximum amount that an individual can pay for a home, while remaining eligible for First Time Buyers’ Relief, from £500,000 to £625,000. As SDLT is devolved in Scotland and Wales, the Scottish and Welsh Governments will receive funding through an agreed fiscal framework to allocate as they see fit.
The basic rate of Income Tax will be cut to 19% in April 2023 – one year earlier than previously planned. At present, people in England, Wales and Northern Ireland pay 20% on annual earnings between £12,571 and £50,270; different rates apply in Scotland. The highest rate of Income Tax (the ‘additional rate’ paid at 45% by those earning over £150,000) will be abolished. From April 2023 there will be a single higher rate of Income Tax of 40%.
The government is reversing the 1.25 percentage point increase in Dividend Tax rates applying UK-wide from 6 April 2023, so the ordinary and upper rates of Dividend Tax will revert to 7.5% and 32.5% respectively.
Other announcements included
As he left the dispatch box the Chancellor concluded, “Our entire focus is on making Britain more globally competitive… We promised to prioritise growth. We promised a new approach for a new era. We promised to release the enormous potential of this country. Our Growth Plan has delivered all those promises and more. And I commend it to the House.”
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All details are correct at the time of writing (23 September 2022)