|Income tax changes: scrapping of the recent 1.25% National insurance increase from 6 November; reduction of 1.25% dividend tax from 6 April 2023||Most individuals will see a direct effect in their November pay packets. Employers will also make a saving in Employer’s NI. The Self-employed will also benefit from this reduction.
Those able to delay dividends until after 5 April could pay less tax than dividends paid in 22/23.
|The only loser in this case could be the NHS, as the motivation behind the 1.25% levy was to ringfence funding for the NHS.
However, the Chancellor has confirmed NHS funding will remain at previously promised levels.
|While the NI cut will only save around £330 per employee per full tax year, in these straitened times, the extra cash will help.
Businesses in particular, who are also suffering from increased energy costs on a larger scale, will also welcome the cost reduction.
|Income tax: basic rate of income tax to reduce to 19% and the additional 45% rate of tax to be scrapped, both with effect from 6 April 2023||Those who only pay tax at basic rates will see a small reduction in tax.
Those with incomes over £150,000 will see a more significant reduction in income tax due.
|While the rate has been reduced, the rate bands and allowances remain frozen. This means that, with expected wage growth from high inflation, more and more people will be pushed into 40% tax.
The reduction in the basic rate will not automatically apply to Scottish taxpayers.
As far as we know, the personal allowance will still taper away for income over £100,000, giving a marginal income tax rate of 60% between £100k and £125k
|It is anticipated that scrapping of the top rate of income tax will make the UK a more attractive place for individuals to pay tax. Nevertheless, the Government’s own figures suggest this measure alone will cost £2bn a year by 2025.
Expect high-earners who can control income to delay receipt until 23/24.
|Increase in corporation tax rate to 25% scrapped and Annual Investment Allowance (AIA) for capital expenditure of £1m made permanent||While there was to be a new smaller companies rate introduced, for many companies this will be a welcome scrapping of an additional cost.
Keeping the AIA at £1m permanently allows for greater long term planning on capital expenditure.
|The pre-announced increase had not yet taken effect and the AIA has been at £1m for some years, so this is very much maintaining the status quo.||Keeping the UK competitive in the global market is going to be key to any growth plan, so the maintenance of the current favourable tax regime is likely to be a good thing for business.
Having said that, 25% would still have been a competitive rate compared to our main competitors
|SDLT thresholds increased to £250,000 and extension of the first time buyer’s relief threshold to £425,000 on houses costing up to £625,000||Anyone buying a house costing under £250,000 will pay no SDLT. Rates for purchases above this amount remain unchanged, but those buying more expensive properties will also benefit from up to £125,000 at 2%, as the first rate band is also scrapped.
The increase in first time buyer relief thresholds will help more people get on the housing ladder.
|Home movers buying a house costing over £250,000 will still have to pay SDLT, although there will be some benefit.
First time buyers in London, where the average house price is £538,000 may still struggle to meet the requirements.
Buyers in Scotland and Wales may not benefit unless the devolved governments make similar reductions
|While this is aimed at heading off a dip in the housing market, the average house price in England was £304,000 in June, so the benefits will be limited.
Also, canny sellers may just factor in the SDLT saving into the price at which they are willing to sell.
|Increase in SEIS investment limits to £200,000.
Company share option plan (CSOP) limits also increased to £60,000.
|SEIS is aimed at increasing investment in smaller, riskier companies, and with up to £100,000 of income tax relief, as well as capital gain tax advantages, this increase wis likely to have both investee companies and their investors feeling like they are winners.
CSOP is aimed at employee shareholders, which is again a win/win for companies and their employees.
|There are unlikely to be any losers from these measures.
While not a loser on these measures, an investment measure that we didn’t see was an increase in pensions annual allowance or the thresholds for higher earners. Again, with rising wages, we could have junior doctors feeling aggrieved again very soon.
|The increase in investment relief limits is good news for encouraging growth, and the increase in funding levels and assets of investee companies will mean more businesses will be able to benefit from this kind of investment- assuming they have the right tax advice of course!
CSOPs are part of a suite of employee-advantaged schemes which can really help with employee reward and retention- and hopefully company growth!
|Reversal of IR35 off-payroll worker 2017 and 2021 rules||Large corporates and public sector bodies which engage contractors through personal service companies (PSC).
These organisations will benefit from a substantial reduction in admin and tax risk
|The taxpayer will lose out if there is a shift back from employment to working via a PSC.
HMRC will find it much harder to police PSCs’ tax compliance individually rather than by focussing on the large corporate engagers.
|Note that this doesn’t mean that the IR35 rules are going away completely, just that the compliance burden is reverting to the intermediary, which is as it was before the recent changes.|
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22 November 2023
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