Mini Budget 2022 Chancellor Gambles and Cuts Taxes
Published / Last Updated on 24/09/2022
The new Chancellor of the Exchequer Kwasi Kwarteng has revealed tax cuts to stimulate growth in the economy in what he claims to be the biggest tax cuts in 40 years.
As you know, we are cynics when it comes to a Budget, but we offer the basic facts first before our opinion.
Income tax
- Basic rate of income tax reduced to 19% from April 2023 in England, Wales and Northern Ireland, Scotland sets its own income tax rates and will likely follow.
- The 45% additional ‘higher’ rate of income tax above £150,000 is abolished from April 2023 with only the main 40% higher rate income tax remaining.
National Insurance for the NHS and Social Care Levy
- The 1.25% add national insurance levy this year, changing to a separate Health and Social Care Levy next year to be abolished from 6th November 2022.
Corporation tax
- The planned increase in corporation tax from 19% to 25% from April 2023 is cancelled.
Low Income Benefits
- Benefits will be reduced for those on Universal Credit that do not complete job searching requirements.
- People that are working but still claim Universal Credit will be ‘forced’ to seek more work or lose benefits.
- Over 50s will be given extra time to retrain to return to work.
Stamp duty
- Nil Rate Stamp Duty Band increases to £250,000 for all and £425,000 for First Time Buyers in England and Northern Ireland with immediate effect.
Bankers' bonuses
- Bankers' bonus cap is cancelled but new regulatory reforms will be announced in Autumn to control excessive bonuses.
Alcohol Duty
- Increases in excuse duty for beer, cider, wine, and spirits are cancelled.
Infrastructure and investment zones
- Government will set up investment zones with 38 local areas with no business rates and stamp duty waived.
- Land for house building or commercial use with have simpler planning consent rules.
Comment
As we suspected, this mini budget will not go down well with tax cuts for high earners but as we have said in earlier videos, 10% of taxpayers pay 90% of all income taxes, so the wealthy pay most of our taxes and will welcome the 45% band being abolished. This will not play well with Labour supporters, but we suggest it is designed to attract skilled workers and new businesses to the UK as does the withdrawal of corporation tax increases. No doubt, the government expects to collect greater revenues with more higher earners and more businesses attracted to the UK.
The 1.25% increase in National Insurance contributions, to be replaced by a Health and Social Care levy next year, has been abolished from November which means lower funding for the NHS when it needs it most, we fundamentally disagree with.
The increase in the stamp duty nil rate threshold for all at £250,000 and £425,000 for first time buyers is yet another way to keep property prices high and greater taxes for capital gains taxes and inheritance taxes.
The already announced energy price cap freeze will reduce inflation but we suggest that inflation will still remain high as tax allowances are still frozen, tax rates are reduced meaning slightly more money in our pockets but energy prices will still have doubled and will remain and only after a year of these higher prices will inflation fall, as there will be no ‘increases’ even though prices will be twice as high after a year of fixed, high prices.
Never forget, governments need inflation to devalue fixed rate covid-19 debts and with the above tax cuts estimated to mean the government borrows over £230bn in 2023, inflation will still be needed to devalue this additional debt too. No doubt markets will react negatively to all these tax cuts and a huge gamble on economic growth.
