Here are the headlines from today's "Mini-Budget" (well, not quite so "mini" with some £45bn of tax cuts...):
- Scrapping of the planned corporation tax rise from 19% to 25% (meant to be implemented from 1 April 2023)
- 1.25% rise in National Insurance to be reversed from 6 November 2022
- Basic rate of income tax will be cut by 1p to 19p from 6 April 2023
- The 45p tax rate for top earners over £150,000 will be abolished from 6 April next year [Since been announced that this change is to be dropped]
- The level at which house-buyers begin to pay stamp duty is doubled from £125,000 to £250,000 (effective immediately)
- First-time buyers will pay no stamp duty on homes worth £450,000, up from £300,000 (effective immediately)
So, what did the markets make of Kwarteng's first "Budget"?
Hmmm...clearly not impressed.
Fear for the UK public finances took centre stage as government borrowings could reach up to £190bn, once these additional tax cuts are added into the mix.
The Chancellor has staked Conservative political fortunes on the belief that the radical tax cuts and deregulation will raise Britain’s sluggish growth rate to 2.5 per cent.
Bake in the increase in interest rates on these borrowings and you can understand the global market wobbles.
This is a risky strategy from the new Chancellor, Kwasi Kwarteng. To be fair, as the cost of living crisis escalates and with a recession on the horizon, he didn't have much wiggle room to play with, so it looks like he has staked his strategy on the mantra of "you can't tax your way to prosperity" (a mantra that was used frequently by Liz Truss during her campaign to become the new Prime Minister).
Seed Enterprise Investment Scheme (SEIS) Changes from April 2023
Less headline-grabbing, but no less important, were the proposed changes to the SEIS scheme and the commitment by the new Chancellor to the SEIS and EIS tax reliefs.
Key Tax Changes Summary
1.25% NIC decrease
At least business owners (and their employees) can benefit from the cut in NIC from Nov (no pressure on the payroll software providers to get the changes in place within less than two months!).
Corporation tax rate increase to 25% from 1 April 2023 is scrapped
The scrapping of the corporation rate increase from next year is welcomed.
It missed the headlines, but behind this new rate was a return to 'messy' calculations for companies whose profits fell between certain thresholds depending on the number of associated companies.
Relieved that's all been shelved as it was an extra 'headache' that most business owners didn't need right now.
Income tax rate cuts - [additional rate of 45% to be scrapped - dropped] and basic rate to be reduced to 19%
Meddling with the income rates more generally is unexpected and I'm unsure will have the desired impact.
I would have much preferred to have seen an increase in the Business Asset Disposal Relief (formerly Entrepreneur's Relief) threshold - back up from the current £1m to £10m of lifetime gains or even unlimited (for now).
We need to incentivise wealth-builders and to reward successfully executed ambition.
Perhaps this whopping "mini" budget didn't go far enough (in some ways) after all...