Corporation Tax Increase Cancelled
The UK’s corporate tax rate will no longer rise to 25% in April 2023.
The increase only applied to businesses earning over £250,000 with a marginal rate for businesses earning between £50,000 and £250,000.
For companies earning under £50,000 per annum, today’s announcement makes no difference at all however for those earning above that level, this will mean tax savings in the coming years.
Cuts to National Insurance
In April 2023, a 1.25% increase in National Insurance was implemented as part of the new ‘Health and Social Care Levy’.
This was largely popular at the time due to the funds raised, being ringfenced for the NHS and social care.
However, this increase will now be scrapped as of 6th November 2022, meaning employees and self-employed will keep more of their income.
Cuts to Income Tax
The promised income tax cut from 20% to 19% has been brought forward from April 2024 to April 2023. This is the first basic rate income tax reduction since 2008/09 and will see a reduction in taxes to millions across the UK.
However, the bigger and more contentious change coming in April 2023 is the reduction in the additional rate of tax from 45% to 40%. This change will affect anyone earning above £150,000 per annum.
Annual Investment Allowance
The annual investment allowance for businesses will be locked at £1m from April 1st next year.
This will give 100 per cent tax relief to businesses on investments in plant and machinery up to the level of £1m.
IR35 simplification
The IR35 rules were introduced in 1999 with the aim to clamp down on individuals working in a manner similar to an employee, but under the guise of a limited company.
Reforms in 2017 and 2021 were supposed to strengthen the system, however due to their complexity, they generally confused businesses and muddied the waters.
The chancellor is planning to repeal these reforms and look to simplify the rules.
VAT-free shopping for tourists
International tourists visiting the UK will now be able to benefit from VAT-free shopping.
The scheme will enable tourists to get a refund on VAT on goods bought, then exported from the UK in their personal baggage.
This, along with a weakening pound (GBP) could result an increase in retail sales from international tourists.
Other Announcements
- Cuts to Stamp Duty
- Company Share Option Plan (CSOP) limit increase from £30,000 to £60,000
- Pension fund investments will be unlocked
- The bonus cap for city bankers has been scrapped
- The introduction of minimum service levels by law to reduce strike actions in industries like the rail sector
- Expansion of the Enterprise Investment Scheme
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