Following the change in Chancellor in recent days to Jeremy Hunt, a number of the previously announced tax changes from the Mini-Budget have now been, to a large extent, reversed. The updates are expected to raise £32bn in revenue for the Government.

We have summarised the recent announcements below: 

Corporation tax

The (originally) planned increase in corporation tax rate from 19% to 25% will now take effect in April 2023. 
The further measure to make permanent the Annual Investment Allowance to £1m will remain. This allows businesses to immediately write off the first £1m of annual spending against their tax bill rather than defer relief over the life of the assets.

Personal tax 

The basic rate of income tax will remain (“indefinitely”) at 20% until economic conditions allow for it to be cut to 19%.

The additional rate of income tax will remain at 45%. The top rate of dividend taxation will remain at 39.35%. This was originally proposed to be an increase towards the Health and Social Care Levy, which is no longer going ahead. It, therefore, appears to be a general rate increase, which makes IR35 tax planning less attractive for contractors. 

National Insurance rates will still drop by 1.25% for employees, employers and the self-employed from 6 November 2022. The Health and Social Care Levy (that would have applied from April 2023) will continue to be abolished. 

Off-payroll working rules (IR35)

There will no longer be a repeal of the changes to off-payroll working brought in from April 2017 for the public sector and from April 2021 for medium and large organisations. This means that the employer NIC cost of employment and the status determination burden will remain with the ultimate client. 

Energy

The Energy Bills Support Scheme provides a £400 non-repayable discount to eligible households to help with their energy bills, and the Energy Price Guarantee reduces the unit cost of electricity and gas so that a typical household in Great Britain pays, on average, around £2,500 a year on their energy bill. 

The above schemes applicable from October 2022 will only apply until April 2023 (rather than for two years).  A review will be undertaken as to how energy bills are supported beyond April 2023.

Bankers bonuses

The cap on bankers’ bonuses will be lifted – we note that this is aimed at preventing the drain of talent to elsewhere. 

VAT

There will be no new VAT-free shopping scheme for overseas visitors to the UK. 

Alcohol duty rates

There will also be no freeze on alcohol duty rates. 

Housing

Since the last announcements, stamp duty will still remain cut permanently for individuals purchasing residential property in England and Northern Ireland. The threshold at which stamp duty is payable remains at £250,000, and the threshold for first time buyers remains at £425,000. The maximum value for the first-time buyer’s relief remains at £625,000. 

Seed Enterprise Investment Scheme

The proposed reforms to the Seed Enterprise Investment Scheme will remain to support business investment.  From April 2023, the maximum amount of Seed Enterprise Investment Scheme (SEIS) investment that can be raised by a qualifying company will still increase from £150,000 to £250,000. The qualification requirements have been relaxed.

Company Share Options Plan

The proposed reforms to the Company Share Options Plan (“CSOP”) will also continue to further support business investment. From April 2023, the CSOP will still be boosted in two ways:

1. an increase to the value of shares that can be placed under option (doubled from £30,000 to £60,000) and 
2. the technical rules which make it difficult for companies with more than one class of share capital to qualify for CSOP will be “eased”.  

CSOP enables qualifying companies to grant market priced options to employees which are taxed as capital gains when the shares underlying the option are sold. Non-tax qualified options are taxed as employment income on exercise.

As noted previously, the changes to CSOP are likely to be of most benefit to listed companies (the increased limit) and larger private owner managed businesses (OMBs). In the OMB space, tax qualified enterprise management incentive (EMI) options are hugely popular. However, only companies with less than £30m gross assets and fewer than 250 employees qualify. CSOP is not subject to such size tests. Historically, companies with more than one class of share capital have found it difficult to qualify for CSOP.  

Although the details of exactly how this restriction will be “eased” are not yet clear, it is likely that there will be a number of companies that have outgrown EMI which will, from April 2023, be able to award tax qualified options under the amended CSOP rules.

We will address specific implications with clients - please let us know if you would like to discuss further including how these changes impact your business.

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