A short article by Sutharman Kanagarajah and Jon Hanifan.
Those who remember 1980s UK culture may recall the Hokey Cokey and its in-out U-turns. Recent UK mini-budget developments have felt similarly changeable, with several original proposals lasting only weeks.
What stays in
Not much remains, but employees and employers will welcome that cuts to National Insurance contributions (NICs) are staying in place.
For the current UK tax year (ending 5 April 2023), this means reversal of the earlier 1.25% NIC increase and abandonment of the planned Health & Social Care Levy for 2023/24 onwards.
By contrast, the proposed reversal of the 1.25% increase in dividend tax rates has not been retained. This remains relevant for owner-managers comparing employment and dividend tax outcomes.
Planned changes to Stamp Duty Land Tax thresholds, including first-time buyer measures, will proceed as previously announced.
Also remaining in place are:
- the permanent GBP1m Annual Investment Allowance, and
- changes to the Seed Enterprise Investment Scheme and the Company Share Option Plan.
What goes out
Corporation Tax has been one of the more confusing areas. The sequence is important:
- the main UK Corporation Tax rate was originally set to increase from April 2023;
- the first mini-budget announced that increase would be cancelled and the rate would stay at 19%;
- that cancellation has now been reversed, so the original increase proceeds and the main rate rises to 25% from April 2023.
The proposed reduction in the basic rate of income tax from 20% to 19% (from April 2023) is also out and delayed indefinitely until economic conditions allow.
The proposed cut to the additional rate of income tax was already dropped previously, and the planned 1.25% cut to the top dividend rate has likewise been scrapped.
One surprising element was the so-called abolition of IR35. In practice, abolition was never proposed; rather, the proposal was to move status decision-making from engager back to intermediary (effectively returning private-sector treatment to pre-April 2021). That proposed change has now been withdrawn and current IR35 rules remain.
What happens next
The next expected chapter was the Medium-Term Fiscal Plan due on 31 October, potentially with further policy adjustments.
While businesses and individuals may welcome parts of the 17 October announcements, many continue to seek greater stability and certainty in UK fiscal direction.
Sutharman Kanagarajah
Head of Tax
Jon Hanifan
Business Development Director
If you have any queries in respect of this article, please contact Centralis.