With the Chancellor confirming around £45 billion of tax cuts in his first fiscal statement, Thorne Widgery is calling on businesses to go for growth using the tax savings on offer.
“A new approach, for a new era, focused on growth” was how Kwasi Kwarteng described his measures as his speech to Parliament got underway, and it quickly became clear how this would be achieved.
In one of the most comprehensive fiscal events in recent years, the Government outlined hard-hitting measures to support businesses, their owners and many other taxpayers with the cost-of-living crisis.
During his speech, the Chancellor confirmed that the previous 1.25 percentage point increase to National Insurance introduced earlier this year would be reversed and the planned Health and Social Care levy abolished.
He also announced that the Corporation Tax rise planned for April 2023 would be scrapped and that this rate of tax would remain at 19 per cent.
To support further investment in plant and machinery within many businesses, the existing £1 million Annual Investment Allowance will also be retained permanently.
The Government also announced the creation of up to 40 tax-free investment zones, offering a number of tax and National Insurance benefits for those located within them.
“Businesses across the UK will welcome the significant giveaways offered in the mini-Budget,” said Daniel Crowther, CEO at Thorne Widgery.
“This is the biggest cut in taxation since 1972, offering billions of pounds in tax savings to SMEs and their owners.
“By taking bold steps, such as reversing the National Insurance rise and abolishing planned tax rises, the Chancellor hopes to improve the UK’s economic growth rate by 2.5 per cent, so that spending and tax receipts increase.”
Within his speech, the Chancellor also announced many personal tax cuts through Income Tax, Stamp Duty Land Tax (SDLT) and for contractors, a repeal of the IR35 rules.
From next April, the additional rate of tax, paid at 45 per cent on earnings over £150,000 will be removed and a 1p cut to the basic rate of tax on earnings between £12,571 to £50,270 implemented.
Many business owners on higher incomes will welcome this change, alongside a reversal of the 1.25 percentage point increase to the Dividend Tax rate.
Those looking to purchase a new home will also enjoy higher minimum SDLT thresholds, which will rise from £125,000 to £250,000 on most property purchases, and from £300,000 to £425,000 for first-time buyers.
Daniel said: “There was nothing mini about this ‘Budget’ considering the tax cuts that have been given away.
“These measures will help many businesses and taxpayers deal with the cost-of-living crisis and should encourage greater business investment in future.”
However, despite the tax reductions being widely welcomed, there is growing concern that inflation will continue to rocket and interest rates will rise, creating many new challenges for businesses and individuals.
“While the Government is trying to temper inflation through measures like the Energy Bill Relief Scheme, the Bank of England might find itself at loggerheads with the Treasury over these measures, which could potentially risk feeding inflation,” added Daniel.
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