- Income tax at the basic rate (currently 20%) will be cut by 1% to 19% effective April 2023. This was originally planned for 2024 but has been brought forward by a year.
- The increase in corporation tax has been cancelled, keeping it at 19%.
- The increase in National Insurance of 1.25% will be reversed with effect from November.
- Higher rate income tax, currently payable at 45% on earnings over £150,000, is to be scrapped with effect from April 2023 and replaced with the 40% tax bracket.
The Chancellor also announced more relief for businesses by making the Annual Investment Allowance £1 million permanently, rather than letting it return to £200,000 in March 2023. This gives 100% tax relief to businesses on their plant and machinery investments up to the higher £1 million limit.
He also announced a reduction in the cost of stamp duty. You can find more details about this here.
These changes were all announced at what was dubbed the ‘mini-budget’ to address the cost of living crisis and build a new ‘Growth Plan’
New measures were also announced to help people on low incomes secure more and better paid work. Universal Credit Claimants who earn less than the equivalent of 15 hours a week at National Living Wage will be required to meet regularly with their Work Coach and take active steps to increase their earnings or face having their benefits reduced. This change is expected to bring an additional 120,000 people into the more intensive work search regime. Jobseekers over the age of 50 will also be given extra time with jobcentre work coaches, to help them return to the jobs market. Rising economic inactivity in the over 50s is contributing to shortages in the jobs market, driving up inflation and limiting growth. Returning to pre-pandemic activity rates in the over 50s could boost the level of GDP by 0.5-1 percentage points.
The majority of announcements today are UK-wide, however the Scottish Government is expected to receive more than £600 million extra funding over the 2021 Spending Review period as a result of the changes to income tax and Stamp Duty Land Tax and the Welsh Government will receive around £70 million over the same period as a result of the change to Stamp Duty Land Tax. The reversal of the Health and Social Care Levy will save 4.3 million people across Scotland, Wales and Northern Ireland more than £230 on average next year.