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There have been lots of announcements about changing tax rates recently, many of which have a direct impact on small businesses, sole traders, and contractors.

Kwasi Kwarteng’s mini budget on Friday 23rd September was shortly followed by a subsequent announcement from Jeremy Hunt in his role as the new Chancellor on 17th October. He released his full Autumn Statement on 17th November 2022, giving more detail to the government’s financial plans.

You can read about the latest updates in our article about the Spring 2023 Budget.

 
The changes cover a wide range of areas including income tax and National Insurance, as well as Corporation Tax for limited companies. With all the confusion, we thought it was well worth a recap of where everything’s up to, and what it means for your business. We also recently published a guide with tips and advice for small businesses dealing with rising costs.
 

What do the income tax changes mean?

Scrapping the Health and Social Care Levy

The changes to Corporation Tax

What changes were announced for IR35?

A permanent increase to the Annual Investment Allowance

Changes to Stamp Duty Land Tax

The introduction of new UK investment zones

Other changes announced in the mini budget – staying or going?

The mini budget put forward changes to UK income tax which would have taken effect from April 2023, but subsequent announcements mean these are no longer going ahead:

This doesn’t affect the Personal Allowance (the amount of income you can earn before you start to pay income tax on it).

 

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The Health & Social Care Levy was introduced from April 2022 as a temporary 1.25% increase to some types of National Insurance. It was set to become a standalone charge the following year which, unlike NI, would have been payable by those over State Pension age. It also affected dividend tax, adding 1.25% to the tax rate.

The government’s mini budget of September 2022 announced that this was no longer going ahead. Hunt’s announcement confirmed that the government are still planning to scrap the levy, and that some types of National Insurance (NI) will change in November 2022, but the increase will stay in place for dividend tax.

What the latest changes mean for National Insurance

What do the NI changes mean for director’s salaries?

The changes to NI don’t actually impact the optimum salary that directors can take to remain tax efficient, because this doesn’t incur National Insurance.

Will the NI rate reversal affect the National Insurance threshold?

In short, no. The National Insurance thresholds which were increased in July 2022 won’t be lowered when the NI rate is – these are separate.

 

For employees For the self-employed
The Primary Threshold is the point at which employees start paying NI on their earnings.

From 6th July onwards this increased to £12,570. It will remain at this level, even when the NI rate is reduced in November 2022.

The Lower Profits Limit (LPL) is the point at which you start paying Class 2 and Class 4 NI.

Like the Primary Threshold for employees, the LPL increased to £12,570.

Self-employed people pay tax and NI at the end of a tax year, so this year the threshold is an ‘annualised amount’ of £11,908. It will remain at this level for the rest of the year, even when the NI rate is reduced in November 2022.

What do the changes mean for dividend tax?

Although the government’s original announcement to scrap the levy included dividend tax, this is no longer the case. This means that the additional 1.25% of dividend tax which was introduced in April will remain in place, even though National Insurance rates will return to their previous levels.

The plans for next year’s Corporation Tax have also been through a few revisions recently. First the government’s Autumn 2021 budget announced that rates were going up, then September’s mini-budget scrapped the idea, and now the increase is going ahead after all.

Plans to repeal reforms to IR35 have now been scrapped – but what exactly does that mean? Well, in September the government announced that they were planning to change who has responsibility for determining IR35 status. In October this was changed back – basically everything is staying as it is.

The Annual Investment Allowance (AIA) is a type of capital allowance. These are allowances which businesses can use to claim tax relief when they invest in long-term assets that they expect to stay in the business for longer than 12 months.

With AIA, you can deduct all of an asset’s value from your profits before tax (which means you’ll pay less tax) in the financial period that you bought the item.

You could previously only claim the AIA up to a maximum limit of £200,000 in a year, which was temporarily increased to £1 million as part of the Covid recovery plan. Expected to stay in place until 31st March 2023, the AIA threshold has now been permanently increased to £1,000,000 and the limit will not be reduced in March as planned.

Jeremy Hunt’s speech confirmed that changes previously announced in September increasing the threshold for paying Stamp Duty Land Tax will continue.

As of 23rd September 2022 the point at which you start paying SDLT on the purchase of a residential property increased:

An important point to note though, is that Stamp Duty Land Tax only applies in England and Northern Ireland. In Wales this has been replaced by the Land Transaction Tax, and in Scotland it’s the Land and Buildings Transaction Tax.

The devolved Welsh and Scottish governments will receive funding to allocate, although the details of what each government will do with this are not yet available.

The mini budget also included support to stimulate growth in specific areas of the UK, and Hunt’s subsequent speech said that these were going ahead. The zones are expected to include a range of tax allowances and incentives over a 10-year period, such as:

Kwasi Kwarteng’s long list of changes included other key announcements impacting businesses in the UK, although some of these are no longer going ahead. Those that are staying include:

Whereas those that are going include:

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About The Author

Elizabeth Hughes

A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible. Learn more about Elizabeth.

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