Chancellor Kwasi Kwarteng has delivered his first budget. It has been called an emergency mini budget to address rising inflation and energy costs. This is on the back of Liz Truss’ promise to cut taxes as part of her campaign to become Prime Minister. Here we look at the key takeaways from the mini-budget and what it means for your money.
What Is A Mini Budget?
A mini-budget is a fiscal event aimed to boost economic growth. The mini budget announced on 23rd September is designed to boost economic growth through tax cuts. The overall package is reported to be worth £161 billion, funded by increasing the UK’s national debt. It is the biggest set of overall tax cuts since 1972.
It took place due to the cost of living crisis in the UK. Most notably the soaring energy bills and the impact of this on the overall UK Economy. As part of Liz Truss’ leadership election campaign she promised to pave the way to economic growth via an emergency budget. It was announced on 23rd September.
Main Points In the Mini Budget
National Insurance – 1.25% rise in NI contributions to be reversed from November.
Corporation Tax – Planned rise to 25% has been cancelled. It will remain at 19%.
Income Tax – Basic rate of income tax is to be reduced to 19% in April 2023 (this is a year earlier than originally planned). The Additional 45% rate of tax has been scrapped from April 2023.
Stamp Duty – The nil rate band has been increased from properties up to £125,000 to £250,000. First time buyers will incur no stamp duty on houses up to the value of £450,000. This is from 23rd September in England. Scotland and Wales to make their own decisions.
Alcohol Duty – Will remain the same for another year.
Health & Social Care Levy – Has now been scrapped. It was due to come into effect from April 2023.
Annual Investment Allowance – £1 million allowance is to remain, rather than revert to £200,000 in March 2023.
Dividends – The 1.25% increase to the rate of income tax on dividends will be reversed from April 2023.
Pension Investments – Regulations will be changed to promote investment by pension funds into UK Assets.
Pension Tax Relief – For 2023/2024 tax year the tax relief at source pension schemes will be 20%. From 2024/2025 IT systems are required to be updated to claim at the relevant basic rate of tax.
Other Financial Support
Energy Bill Relief Scheme – Prior to the budget the Government announced a support package to provide a discount on wholesale electricity and gas prices for non-domestic customers. This is in addition to support to cap household bills at £2,500 for two years from October 2022. A £400 energy rebate will continue as planned.
It remains to be seen how this will impact the average UK household. Whilst it will make immediate savings in terms of the potential astronomical increases in energy prices that were expected, they still remain at record high levels. There are obvious tax savings the average household will benefit from. If you are in the market for a new house in the £125,000 to £250,000 bracket, you will save on stamp duty.
In reality however, the cost of living continues to increase, as does the cost of buying average household goods. The pound has dropped since the mini-budget announcement, potentially increasing the cost of goods even further. Interest rates continue to rise which will increase mortgage and borrowing costs, maybe offsetting stamp duty savings. It remains a challenging time for UK households and the UK economy as a whole.
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