Muras Matters: Mini-Budget 2022 – Tax Cuts and Reversal of Planned Increases


Chancellor Kwasi Kwarteng delivered a mini-Budget on Friday aimed at tackling rising inflation and stimulating economic growth through the cutting of taxes, reversal of planned tax increases and maintaining attractive allowances.

Whilst the reversal of the National Insurance increase introduced earlier in the year was expected, a number of other measures did come as a surprise. This week in Muras Matters we will highlight some of the more significant announcements the Chancellor made.


Income Tax

The big announcement made by the chancellor was the scrapping of the 45% additional rate of income tax with effect from April 2023. Previous additional rate tax payers will now also be eligible to claim the £500 Personal Savings Allowance from April 2023.

In addition the planned cut to the basic rate of income tax from 20% to 19% has been brought forward by a year. The reduction to 19% will now apply from 6 April 2023.

Pension contributions will however continue to obtain relief at source at 20% until 5 April 2024 under the application of a one year transition period.

National Insurance Contributions

As reported prior to the mini-budget, the national insurance contributions (NIC) increase introduced in April 2022 was reversed. With effect from 6 November 2022 therefore the NIC rate will be cut by 1.25% for both employees and employers.

It was also announced that the planned health and social care levy due to come into effect from April 2023 has been cancelled.

Dividend Tax

The Government is reversing the 1.25% increase in the dividend tax rates from April 2023. The dividend rates will be restored to the previous levels of 7.5% for basic rate income and 32.5% for higher rate income. With the abolition of the additional rate of income tax, the additional rate of tax applied to dividends will also be scrapped from April 2023. No details have yet been published regarding the rate applicable to trusts, which previously mirrored the additional rate.

Corporation Tax Increase

The planned increase in the main rate of corporation tax to 25%, from April 2023 for companies with profits of £250,000 or more, has been cancelled. The rate will therefore remain at 19% for all companies. This also means that the return of the small companies’ rate and the need for marginal relief for those companies between the lower and upper thresholds has also been removed.

Annual Investment Allowance

The annual investment allowance (AIA) will now remain at £1 million permanently instead of reverting back to the lower £200,000 limit that was due to be reintroduced in 2023.

There was no announcement on the 130% super deduction available to companies, although it is still expected to end at 31 March 2023 as previously announced. With the corporation tax rate remaining at 19% further details on the impact this will have on the relief is expected to be issued in due course to ensure that the allowance continues to operate as it was originally intended to.

Off Payroll Working

One of the major surprises in the mini-Budget was the significant decision to reverse the off payroll working regulations. From April 2023 the Government will cancel the IR35 or off payroll working rules that were brought into effect for the public sector in 2017 and for the private sector in 2021.

IR35 is not being abolished but with effect from April 2023 the rules will effectively go back to the those in place from 2000. The onus on determining whether an engagement contract falls inside or outside IR35, and therefore who is to account for any PAYE/NIC, will revert to the contractor’s personal service company rather than the end user of the services. This should make it easier for companies who engage with individuals through a personal service company.

SEIS Investment Schemes

To encourage investment the Chancellor announced measures to make the Seed Enterprise Investment Scheme (SEIS) available to more companies from April 2023. The amount that a qualifying company will be able to raise will increase from £150,000 to £250,000. The qualifying criteria for the company is also to be relaxed with eligibility limits for gross assets going up from £200,000 to £350,000, and the age limit for the company’s trade rising from 2 years to no more than 3 years old.

The annual investor limit is also to rise from £100,000 to £200,000.

Stamp duty land tax

Stamp duty land tax (SDLT) is also to be cut under the proposals announced in the mini-budget and will take immediate effect from Friday 23 September 2022.

The nil-rate band for the purchase of residential property will double from £125,000 to £250,000, while first-time buyers will pay no SDLT up to £425,000 and can claim relief on properties valued up to £625,000. These changes affect England and Northern Ireland only.

If you have any questions or require further information regarding how any of the changes outlined above may affect you, please speak to our Tax Director, Jenny Marks.

To see our other news items please visit our Muras Baker Jones – Blog.