UK reverses several tax-cut measures announced in Action Plan 2022
In September 2022, the former UK Chancellor of the Exchequer, Mr. Kwasi Kwarteng had presented the Growth Plan 2022 before the Parliament making several announcements to tackle the cost-of-living crisis. The announcements included several tax-cut measures. However, some of the announcements received a major backlash from public and markets forcing Mr. Kwasi Kwarteng to resign. Subsequently, Mr. Jeremy Hunt was appointed as Chancellor of the Exchequer on October 14, 2022.
The following are the key announcements of the UK Government regarding measures proposed in the Growth Plan 2022:
• Corporate tax rate for 2023 will increase to 25% for companies earning more than GBP 250,000. However, small profits rate of Corporation Tax will be maintained whereby smaller or less profitable businesses will not pay the full 25% rate and businesses having profits less than GBP 50,000 will continue to pay Corporation Tax at 19%.
• Basic income tax rate will not be reduced from 20% to 19% from April 2023. UK Prime Minister has earlier announced the abandoning of plan to remove 45% additional tax rate.
• Dividend tax rate reduction 1.25% will not be proceeded with.
• 2017 and 2021 reform relating to ‘off-payroll working rules’ (known as IR-35 Reforms) will not be repealed from April 2023.
• VAT free shopping scheme for non-UK visitors as well as proposed freeze on alcohol duty will not be proceeded with. However, Alcohol Duty Review announced in Growth Plan 2022 will continue as planned.
• The Energy Price Guarantee and the Energy Bill Relief Scheme will be continued till April 2023 as against the earlier plan to provide support for 2 years from October 2022. A Treasury-led review will be launched to consider how to support households and businesses with energy bills after April 2023.
• However, previous announcements regarding 1.25% reduction in national insurance contribution rate for employee and employer from November 2022 and repeal of Health and Social Care levy of 1.25% which was to apply from April 2023 will be proceeded with. Further, the earlier announcements regarding stamp duty land tax relief would continue.
UK Chancellor Mr. Jeremy Hunt is expected to announce further changes to fiscal policy on October 31, 2022.
Companies should take note of the planned increase in corporation tax rate from April 2023. Employers should note that the earlier plan to reduce basic personal income tax rate to 19% and to scrap additional tax rate of 45% from April 2023 have been abandoned. However, reduction in employer’s and employee’s national insurance contribution will provide relief. Companies should monitor future developments, particularly additional announcements expected towards end of October 2022.
© Shan & Co 2022