Our firm will provide a full Budget analysis next week. However, in the meantime there are a few highlights here –
Income Tax & NIC Reductions –
The UK (non-Scottish) basic rate of income tax will be cut from 20% to 19% from April 2023.
- The additional tax rate of 45% will be abolished leaving only one higher rate of tax of 40%. This also applies to the additional dividend rate (currently 39.35%). (wait to see if ScotGov replicates the removal of top band).
- The additional dividend tax of 1.25% which was introduced from April 2022 will be removed from 6 April 2023 – the highest dividend tax rate will therefore be 32.5% (we believe). Seems the top rates of 39.35%/38.1% will end (TBC).
- Class 1 and Class 4 NIC is being reduced by the 1.25% which was introduced earlier this year, reducing it back to 12% and 9% respectively from 6 November 2023.
- The separate Health & Social Care Levy, which was being introduced from April 2023 has been reversed and will not come into effect (which was to collect the 1.25% in future).
IR35
The 2017 and 2021 reforms to off payroll working (IR35) will be repealed from 6 April 2023. From this date, workers providing their services via an intermediary, such as a company, will be responsible for determining their employment status and paying the appropriate amount of tax & NIC.
Investment Schemes
- The Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT’s) will be extended beyond 2025.
- For the Seed Enterprise Investment Scheme (SEIS) and Company Share Option Plan (CSOP) – the limits will become more generous.
Corporation/Business Tax
The rise in corporation tax from 19% to 25% which was set to take effect from April 2023 has been cancelled.
- AIA is set to remain at £1m “permanently”.
Other Policy Changes
- Stamp Duty Land Tax (SDLT) – increase in thresholds from £125,000 to £250,000 and increase from £300,000 to £425,000 for first time buyers (not applicable in Scotland – wait and see if LBTT changes made here).
- Reforms to the Pensions Regulatory Charge Cap – ensuring that savers benefit from higher potential investment returns by allowing wider investment classes/risks.
- VAT free shopping for overseas visitors.
- No increase to Alcohol Duty.
As an observation, this was a “big Budget” – the dust will need to settle. Wealthy taxpayers will want to consider the timing of bonuses, dividends and pension contributions very carefully!
