A Summary of the Mini Budget

Chancellor Kwasi Kwarteng made his first major announcement since taking office. Kwarteng has said that his ‘mini-budget’ represents the “biggest tax cuts in a generation”—and comes the day after the Bank of England warned that the UK may already be in a recession. 

Let's look at some of the key changes of the budget that affect the Self Employed, whether your a sole trader or Limited Company.

Income tax

The Chancellor announced a reduction in basic and higher rates of income tax: 

• The basic rate of income tax will reduce from 20% to 19% from April 2023

• The 45% higher rate of income tax will also be abolished, meaning that there will only be one single higher rate of income tax of 40%.

Note that these changes won’t impact taxpayers until the next tax year starts in April 2023.

National Insurance

• Kwarteng has also reversed the recent 1.25% rise in National Insurance Contributions (NI)—a change that will come into effect from 6th November.

• In 2021, the government also outlined plans to introduce a Health and Social Care Levy, which would increase National Insurance Contributions. This levy has now been scrapped.

Dividends

It comes on top of the previously announced plans to abolish the 1.25 per cent increase that former Chancellor Rishi Sunak announced last year.

Dividend rates will reduce by 1.25% from the April 23 tax year. 

This will see dividends charged at the following rates:

• Basic rate tax band (up to £50,270)- 7.5% a reduction from 8.75%

• Higher rate tax band ( above £50,270)- 32.5% a reduction from 33.75%.

Stamp duty

In a bid to stimulate the property market, the Treasury has also raised stamp duty thresholds for people buying property in England and Northern Ireland. These changes will come into effect from 23rd September.

• No stamp duty will be payable on the first £250,000 of a property’s price (vs the previous threshold of £125,000)

• For first-time buyers, that threshold rises to £425,000 (vs £300,000).

IR35

• The IR35 reforms which were introduced for the private sector in April 2021 will be repealed (reversed)  from April 6th, 2023. The reforms transferred the responsibility for assessing whether a contractor is self-employed or employed to the end client, rather than the contractor themselves. 

• Under the Chancellor’s changes, it will once again be the worker who is responsible for determining their employment status and paying the right amount of tax and national insurance contributions. 

• The motivation behind this change is to reduce complexity in the tax system. It will hopefully also make it easier for businesses to work with contractors.

What this means is hopefully we should find more contract work falling Outside of IR35 regulations again as the contractor can determine the decision.

Other

Other announcements made in the budget that may have an indirect impact on self-employed people and landlords include: 

• The energy package, which will attempt to combat the cost of living crisis, contains components that will impact both businesses and individuals

• There will be VAT-free shopping for overseas visitors

• Planned increases in the duty rates for beer, cider, wine and spirits will be cancelled

• The planned increase in corporation tax has been cancelled (it remains at 19%)

• The cap on bankers' bonuses will be removed

If you have any questions or queries around the budget drop us an email (jamie@tax-ninja.co.uk) or call on 01869 323887.