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Mini-Budget – September 2022

On Friday 23 September the Chancellor of the Exchequer, Kwasi Kwarteng, delivered the Government’s Emergency Mini Budget. And what a budget it was! Major changes were announced to income tax, national insurance, corporation tax, stamp duty land tax, VAT, and more. To learn what was announced, check out our summary below:

Mini-Budget-2022

While understanding what was announced is a good first step, it’s more important to understand why it matters. To that end we have included some of our initial thoughts below:

The Budget: An Accountant’s Perspective 

Incorporation – Before this budget, incorporation was looking less and less attractive every year. Corporation tax was due to increase to 25% from 2023 and dividend rates were up by 1.25%. For businesses considering incorporation, the retention of a flat 19% corporation tax rate and a reversal of the dividend tax increase, makes this prospect more attractive than it may have appeared just a month ago.

Super Deduction: Investment – Before this budget, there wasn’t a particular incentive for moderately profitable businesses to accelerate CapEx expenditure (unless you were likely to exceed the Annual Investment Allowance). The reason for this is that 130% relief on 19% corporation tax was pretty much the same as 100% relief of 25% corporation tax. With corporation tax now fixed, businesses should definitely consider bringing forward CapEx to maximise the 130% rate. Why save £1,900 on a £10,000 purchase (£10,000 x 19%) when you could save £2,470 (£10,000 x 130% x 19%) by making sure you buy before 31 March 2023.

Property Companies – The increase in SDLT (Stamp Duty Land Tax) thresholds will be good news for buy-to-let landlords, who might want to review their options. A landlord buying a new home worth £250,000 will save £2,500 as a result of this budget. 

Contractors and IR35 – Larger companies should reconsider their policies as they may now feel more able to engage with contractors. Contractors, who may previously have been pressured into engaging on an employee basis, would be advised to re-open that conversation with the entity engaging them. 

VAT Free-Shopping – The Chancellor announced VAT free shopping for international tourists but how exactly is that going to work? Businesses, particularly those who cater to tourists, will need to ensure they’re fully up to speed with what these changes mean in practice so that they can put policies in place to ensure they are compliant.

Investment Zones – Exciting news for new businesses, but potentially equally exciting for property development companies. We would advise businesses to pay due attention to developments in this area to ensure they can benefit from the tax savings offer.

Breweries – Should re-budget given the freeze in alcohol duty and the extension of draught relief to cover smaller kegs of 20 litres and above.

Holding Companies – Before this budget, we were worried about the associated company rules which could have resulted in group companies paying more tax. With Corporation Tax fixed at 19%, that’s not an issue anymore, making group structures more viable.

If you have any questions regarding this budget, we would be delighted to help you. If you are an existing client, you can contact your account manager via email or calling the office on 01326 660022.

If you are not one of our clients, you can get in contact by emailing us using tax@thepeloton.co.uk or you can call our office on 01326 660022.

*Update: Since the budget was announced, Kwasi Kwarteng has confirmed that the 45% additional rate of tax will be maintained.