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New Chancellor, Kwasi Kwarteng, announced a sweeping package of tax cuts in his mini-budget last week – the biggest the UK has seen in the last half-century. Below we have outlined the main measures.
- Basic rate income tax is set to reduce from 20% to 19% from 6th April 2023. This is the first cut to income tax in 15 years and is the lowest the basic rate has ever dropped to in the modern income tax system.
- The additional rate of income tax (45%), for those earning over £150,000, is set to be abolished from 6th April 2023. This means that all earnings over the higher rate threshold (currently £50,270) will be taxed at 40%.
- The 1.25 percentage point increase in National Insurance Contributions has now been reversed, effective from 6th November 2022.
- The planned rise in corporation tax has also been scrapped, keeping this at the current 19% rather than the proposed 25%.
- Stamp Duty Land Tax has been cut, with the threshold after which tax is paid rising from £125,000 to £250,000. For first-time buyers this has risen from £300,000 to £425,000. The maximum value of a property on which first-time buyers’ relief can be claimed is set to increase from £500,000 to £625,000.
The Government has coined the package its Growth Plan, with the intention being to tackle energy costs to bring down inflation, back businesses, and help households. An ambitious target of reaching a 2.5% trend rate of growth has been set, forming the focus of the plan. As can be expected, the announcement has so far received mixed reviews.
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