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Chancellor Kwasi Kwarteng has unveiled his tax-slashing 'mini-budget'. So what does it mean for UK businesses? Here we’ve summarised the main points.
Chancellor Kwasi Kwarteng has unveiled his tax-slashing 'mini-budget' (Growth Plan) consisting of £45 billion in cuts.
Revealing his plans to MPs in the Commons on Friday 23rd September, it all forms part of new PM Liz Truss' wider plans to tame inflation and tackle the spiralling cost of living.
Mr Kwarteng introduced a range of measures including: cancelling a planned corporation tax rise, slashing stamp duty and confirming help with sky-high energy bills.
So what does this mean for UK businesses? Here we’ve summarised the main points.
The basic rate of income tax will be cut to 19p in the pound from April 2023. In effect this means 31 million people will be better off by an average of £170 per year. The 45% higher rate of income tax is also being abolished.
It was already announced that April's National Insurance hike is to be reversed from the 6th November - saving money for businesses and 28 million workers. The 1.25 percentage points increase was introduced under former chancellor Rishi Sunak.
Mr Kwarteng told MPs: "This will simplify the tax system and make Britain more competitive. It will reward enterprise and work. It will incentivise growth. It will benefit the whole economy and the whole country."
Mr Kwarteng said the government would also simplify IR35 rules, noting reforms to off-payroll working have added “unnecessary complexity and cost” for many businesses.
He said: “As promised by the prime minister, we will repeal the 2017 and 2021 reforms. Of course, we will continue to keep compliance closely under review.”
"We will have the lowest rate of corporation tax in the G20. This will plough almost £19 billion a year back into the economy", Mr Kwarteng said.
Former Prime Minister Boris Johnson had planned to increase Corporation Tax to 25% up from the current 19%. Those in support of the move say that it will encourage businesses to come to the UK and attract investment, bringing about more money for government in taxes.
The chancellor confirmed that the energy rescue scheme for households and businesses is expected to cost £60 billion for the first six months from October. The point behind his energy package is to reduce inflation by five percentage points whilst cutting the cost of servicing index-linked government gilts.
Kwarteng said the government would take “difficult decisions” to try to achieve 2.5% annual growth of the economy through tax incentives and deregulation. “That is how we will compete successfully with dynamic economies around the world,” he said.
The chancellor revealed he would set out a new fiscal plan in the coming months, promising that the Office for Budget Responsibility would produce independent forecasts before the end of the year.
The government will legislate to require trade unions to put pay offers to a member vote so strikes can only be called once negotiations have fully broken down.
The aim here is to cut taxes for businesses in designated sites for 10 years therefore supporting jobs, growth and investment. In talks with 38 local and mayoral combined authority areas in England about "investment zones", the scheme is expected to be rolled out more widely across UK.
The government has long supported business growth in the UK and it appears that this remains the case.
Innovation is widely recognised as key not just to long term company survival but to the broader UK economy. This is why schemes such as R&D Tax Credits exist, in order to help cover the costs of innovative R&D projects.
R&D Tax Credits is one of the most generous tax relief schemes around too, allowing up to 33% of eligible R&D costs to be claimed back from HMRC. Such costs include staff wages, employers pension and NI contributions, materials, gas and electricity costs and much more. And with average claims at around £55,000, it’s cash that’s well worth having - not least as it can then be reinvested into further R&D projects.
If you would like to find out more about R&D Tax Credits or get the ball rolling on a claim, get in touch with our team on 0207 118 6045. Alternatively, send us a message.