Mini-Budget 2022

On Friday 23^rd September 2022, Chancellor Kwasi Kwarteng announced the details of the Mini-budget, stating what he claims to be the biggest tax cuts in a generation.

Here’s what you need to know as a limited company contractor:

National Insurance

It was announced earlier this year that NICs would be increasing as a ‘Health and Social Care Levy’ in order to help the NHS recover from the strain of the pandemic.

From the 6^th of April 2022, an extra 1.25% was added to National Insurance – these changes were always meant to be temporary, lasting for one year until April 2023.

However, the Chancellor has decided to reverse this short-term rise starting from the 6^th of November 2022, with the Health and Social Care Levy being scrapped entirely, despite talks about introducing it as a method of paying for the NHS.

Income Tax

Previously, the government announced that there would be a cut in income tax; reducing it by 1%, from 20% to 19%.

At the time, we were told that this wouldn’t come into effect until 2024, however, this has now been accelerated to come into effect in April 2023.

Corporation Tax

Earlier this year, the rate of corporation tax was set to rise from 19% to 25% in 2023 in order for the UK’s businesses to help toward the economic recovery.

However, in another turnaround, this has now been scrapped with the rate remaining at 19% for the majority of firms.

Dividends

Dividend tax rates increased on the 6^th of April 2022, but they are now dropping back down from April 2023 to:

• Basic rate – 7.5% (was 8.75%)
• Higher rate – 33.75% (was 32.5%)

The additional rate will be abolished.

Energy

In addition to the Energy Price Guarantee for households, the Energy Bill Relief Scheme will be very much welcomed by UK businesses.

Designed to cut energy prices for non-domestic energy customers, the scheme will apply to fixed contracts agreed on or after 1^st April 2022 in addition to deemed, variable and flexible tariffs and contracts.

It will apply to energy usage from the 1^st of October 2022 to the 31^st of March 2023 and businesses won’t need to register for the scheme, as it’ll be automatically applied to bills.

IR35

News that will be very much welcomed by the self-employed and business owners, is that IR35 rules are to be simplified.

The legislation has seen many changes over the years and it seemed to be that each change made it that bit more complicated and confusing for all those involved.

The most recent reform (in 2021) meant that it became the responsibility of the client to decide a worker’s status, which put more pressure on businesses and resulted in many choosing a blanket approach.

However, from the 6^th of April 2023, workers will once again be responsible for determining their own employment status and will therefore pay the correct amount of tax and NICs.

Commenting on the IR35 changes, Zeeshan Anwar, Head of Compliance at Dolan Accountancy, said, “It’s a pleasant surprise that the new Government has moved so swiftly in repealing the off-payroll reforms, and undoubtedly this will make the whole contractor industry very happy.

“The reforms made contracting complex and burdensome, and going back to the old rules should bring some simplicity back to the sector. The industry has time, until April 2023, to ensure compliance with the IR35 rules and I’m hoping that end clients, recruitment businesses, and indeed the public sector rethink their positions regarding limited company contracting and not be so detrimentally cautious like before.”

For more information, take a look at our Mini-Budget 2022 summary.

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