The Government has announced a huge number of economic changes that will affect everybody’s finances.
They include tax cuts, as well as changes to the rules around business taxation. Here’s what has been announced, and how the changes could affect you.
Tax changes
The Government announced a number of tax changes.
- A cut in the basic rate of income tax from 20 per cent to 19 per cent, which was meant to come in in 2024 will now come in in April next year.
• The top ‘additional rate’ of income tax paid by those earning £150,000 will be abolished for taxpayers in England, Wales and Northern Ireland, also from April 2023
• The 1.25p in the pound increase in national insurance to pay for health and social care has been abolished from November 6.
• The 1.25p in the pound increase in dividend tax will be abolished from April 2023
How these will affect you
- The Government believes that reversing the national insurance rise will save £330 a year for the average taxpayer. High earners will benefit the most from this
- The income tax cut would save £167 for someone earning £20,000 a year, rising to £1,469 for those on £100,000 a year.
- For additional rate taxpayers, the abolition of the higher rate of tax will save even more. According to the BBC, someone earning £200,000 will save over £5,000 a year1
- Rates are different in Scotland
Stamp duty changes
The Government announced that the threshold for paying stamp duty will be doubled from
£125,000 to £250,000.
First-time buyers will pay no stamp duty on homes worth up to £425,000, while they will be eligible for discounted stamp duty on homes worth up to £625,000, up from £500,000.
Unlike the stamp duty holiday during the Covid-19 pandemic, this cut is permanent.
How this will affect you
If you buy a £250,000 property in England or Northern Ireland, you will save £2,500 in stamp duty, as you would previously have paid two per cent on the part of that purchase between £125,000 and £250,000.
First-time buyers will save more, especially if they want to buy more expensive properties. The devolved administrations in Scotland and Wales are yet to confirm whether they will be following suit.
Changes for companies
- Corporation tax was due to rise to 25 per cent. This will now remain at 19 per cent
- The IR35 rules that govern whether someone is self-employed or an employee will be simplified
- Companies will be able to raise more under the SEIS seed investment scheme that gives tax breaks for early stage funding.
- The annual limit for issuing share options to employees has been doubled to £60,000
- A number of investment zones will be set up, where more tax benefits for investing will be available
How these will affect you
It may be easier to invest using SEIS schemes, for those who are happy to take a risk on early stage investments. Those who are self-employed working through their own companies with profits over £50,000 (who would have paid more corporation tax) will now continue to pay 19 per cent tax.
It may also be easier to be employed as a contractor, due to an easing of IR35 rules.
Other changes
- Alcohol duty rises have been scrapped
- The government will consult on VAT-free shopping for tourists
- Rules around Universal Credit will be tightened, so that it harder to claim benefits without fulfilling extra job search commitments
- Rules limiting bankers’ bonuses will be scrapped
How these will affect you
Beer and wine prices may not rise so steeply after the scrapping of the alcohol duty rise. The VAT-free shopping plan is aimed at tourists coming into the UK, and it is hoped that they will spend more here.
The Universal Credit rules may make it harder to get help if you are unemployed, though there are extra plans to help the over-50s get back into work.
27th September 2022