A tax specialist at a Midlands accountancy firm says the “yo-yo mini-budget” announced by the government today (Friday, September 23) will do little to reassure either individuals or businesses.
Claire Lea, director and head of advisory tax at Prime Accountants Group, said the announcement from new chancellor of the exchequer, Kwasi Kwarteng, went far further than expected but was light on detail.
Claire said the “yo-yo” rises and falls in taxation and National Insurance will lead to further uncertainty at what is already a difficult time.
Mr Kwarteng’s announcement came against the national picture of spiralling inflation, increased costs and an announcement from the Bank of England that the UK may already be in a recession.
As expected, he formally reversed the 1.25 per cent increase in National Insurance, which was only introduced in April this year.
The planned increase in corporation tax rates from 19 per cent to 25 per cent from April 2023 has been cancelled, while the stamp duty threshold has been raised to £250,000, or £425,000 for first-time buyers.
It was also announced the basic rate of income tax has been cut to 19p and the 45 per cent top rate of tax will be abolished.
Claire said: “There’s not much mini about today’s ‘mini-budget’ – it’s gone further than we expected, with lots of big announcements. However, there is no real detail – as the shadow chancellor said, it’s a ‘budget without figures, like a menu without prices.’
“The main announcements around Corporation Tax and National Insurance were as expected but it was a complete surprise about abolishing the additional rate tax of 45 per cent. This will come down to a single rate of 40 per cent and will only help people who earn more than £150,000.
“With Corporation Tax, the chancellor also announced the annual investment allowance will remain at £1 million per annum, instead of reducing to £200,000 from April 2023.
“There will also be increases to the limits for share plans and SEIS but, again, we are yet to see the detail on that.”
Claire said the plans to repeal the IR35 off-payroll working rules will also have a “massive impact” on businesses which use contractors, and the contractor market as a whole.
Claire said she would also wait to hear full details about tax relief for new investment zones, which will include the West Midlands.
“The chancellor mentioned the creation of new investment zones and specifically mentioned the West Midlands. A number of tax savings are expected in these zones but we expect to see more detail in the full budget,” she added.
In conclusion, Claire said: “It’s a real yo-yo budget. Even in this tax year, the way that National Insurance and tax rates have been going up and down makes things very uncertain for individuals and businesses. And we are living in uncertain times as it is.
“I can’t see there is much to be excited about in this budget, either for businesses or individuals. There’s no targeted support for businesses or real help for households either.”