Update 17 October: see our briefing here for subsequent changes to these measures

Overview

As expected, the Growth Plan included important interventions in the energy market, such as the new Energy Market Financing Scheme which aims to reduce the disruption to the UK’s wholesale gas and electricity market.

The Chancellor, Kwasi Kwarteng, also focused on expanding the supply side of the economy, as well as a commitment to cut taxes for people and businesses.

This briefing highlights some of the key tax measures announced today that may affect Bristows’ clients.

Corporate and Business Taxes

Corporation Tax (SCRAPPED on the mini budget of 17 October)

The planned increase in corporation tax rates to 25% from April 2023 has been abolished and so the rate will remain at 19%, making it the lowest corporation tax rate in the G20.

Introduction of Investment Zones

The Chancellor announced the introduction of Investment Zones across the UK, with the aim of driving growth and unlocking housing. These zones will benefit from tax incentives, including business rates relief, enhanced capital allowances, enhanced structures and buildings allowances, Employer’s NICs relief in relation to new employees and a full SDLT relief. Other benefits include planning liberalisation and wider support for the local economy.

Enterprise Investment Scheme, Venture Capital Trusts and Seed Enterprise Investment Scheme (RETAINED on the mini budget of 17 October)

The sunset clauses included in the EIS and VCT legislation (due to a requirement under EU State Aid rules) meant that the reliefs were only to apply to shares issued on or before 5 April 2025. The Chancellor announced this morning that the sunset clauses will now be extended beyond 2025, although we await further details on the extension.

Growing businesses will also welcome the changes to the existing limits for the SEIS that were announced today:

• From April 2023, the limit for the amount of SEIS investments raised by a company will be increased from £150,000 to £250,000.
• The gross asset limit for companies raising SEIS funds will be raised from £200,000 to £350,000.
• The current requirement for companies raising SEIS funds to be less than 2 years old will be increased to 3 years.
• The annual investor limit will increase from £100,000 to £200,000.

Annual Investment Allowance (RETAINED)

The temporary £1 million level of the annual investment allowance, which gives a 100% capital allowance for qualifying expenditure on plant and machinery, will be made permanent instead of the planned reduction to £200,000 which was intended to take place after 31 March 2023.

Diverted Profits Tax

The planned increase in Diverted Profits Tax from 25% to 31% as of April 2023 has been cancelled, in order to keep the 6% differential with the main Corporation Tax rate.

Employment Taxes

Income Tax (SCRAPPED)

The 1% cut to the basic rate of income tax from 20% to 19% has been brought forward to April 2023, which is 12 months earlier than originally planned.

The additional rate of income tax has also been abolished, effective from April 2023. That means that there will now be a single higher rate of income tax of 40% rather than an additional 45% rate on annual income above £150,000.

Reversing the Health and Social Care Levy (RETAINED)

In April 2022, NICs rates were increased by 1.25% to account for the new Health and Social Care Levy. This change is being reversed as of 6 November and the planned introduction of a 1.25% Health and Social Care Levy as a separate tax from April 2023 has been cancelled.

Repeal of the off-payroll working rules (also known as IR35) (SCRAPPED)

The Chancellor unexpectedly announced the repeal of both the 2017 (public sector) and 2021 (private sector) off-payroll working rules from 6 April 2023 due to their complexity and the burden they imposed on businesses. This means that workers across the UK providing their services via an intermediary, such as a personal service company, will once again be responsible for determining their own employment status and paying the appropriate amount of tax and NICs.

Company Share Option Plan (CSOP) limits (RETAINED)

From April 2023, the number of CSOP options that can be issued to employees by a qualifying company will be doubled from the current £30,000 limit to £60,000.

Real Estate Taxes

Stamp Duty Land Tax (“SDLT”) (RETAINED)

In an attempt to get the housing market moving, the Chancellor announced the following changes to SDLT residential rates, to have effect from today:

• Increasing the 0% threshold for residential properties from £125,000 to £250,000.
• Increasing relief for first time buyers, meaning that first time buyers will begin to pay residential SDLT from £425,000 rather than £300,000 and the maximum value of a property on which first time buyer’s relief can be claimed will increase from £500,000 to £625,000.

Other notable announcements

• Removal of the bankers’ bonus cap, which limits remuneration of certain bank staff.
• Abolishing the Office of Tax Simplification; instead, the Chancellor plans to embed tax simplification into the institutions of government.
• SCRAPPED: Cancelling the planned 1.25% increase in Dividend Tax rates as of April 2023, aimed at supporting entrepreneurs and investors to drive economic growth.
• SCRAPPED: Alcohol duty reform: due to high inflation rates, the government will freeze the duty rates from 1 February 2023.
• SCRAPPED: Introduction of VAT-free shopping for overseas visitors via a modern, digital scheme, with the aim of providing a boost to the high street.

If you would like further information in relation to any of these measures, please contact a member of our tax team.