Unbelievable, staggering and incredible could all be used to describe the whirlwind 26 minutes of Kwasi Kwarteng’s ‘mini’ Budget statement – his first as Chancellor, and setting the tone for the Liz Truss Government, says Nimesh Shah, CEO at leading tax and advisory firm Blick Rothenberg.
Nimesh said, “Kwarteng and Truss set out to be as bold as they could be, with clearly one eye on a General Election in 2024, or possibly sooner.
“Every statement from Kwarteng represented a tax cut. The health and social levy is no more before it was due to take effect and the 25% corporation tax cancelled – both costing the Treasury around £28 billion.”
He added, “After quickly reversing the work of Rishi Sunak, what followed was a series of tax cutting measures not seen in a generation.
“Cuts to stamp duty land tax by raising the zero rate threshold to £250,000 and enhancing the first time buyers’ relief will save someone £11,250 buying a property worth £600,000.”
Nimesh said, “In a widely expected move, Rishi Sunak’s pre-announced 1% reduction to basic rate income tax was brought forward to April 2023 – someone earning £40,000 will be £563 better-off next tax year (2023/24) compared to the current year. The most radical move from the new Chancellor was to abolish the 45% additional rate of tax for someone earning over £150,000, which has been in existence for just over a decade. Someone earning £200,000 will be better-off by £4,333 next tax year.”
“It would be easy to overlook the 6.85% cut to the highest rate of dividend tax – good news for business owners and the self-employed receiving dividends, and savers and pensioners with investment portfolios.
“There was lots for businesses to get their head round – it started yesterday with the 1.25% cut to employer’s National Insurance and was followed today that corporation tax would remain at 19%. The new government set out its agenda to encourage investment by making permanent the £1 million ‘annual investment allowance’, extending the Enterprise Investment Scheme and Venture Capital Trust regime beyond 2025 and confirming that the limits for the Seed Enterprise Investment Scheme and tax advantaged share schemes would be increased, but there were no details on the latter.”
Nimesh said, “Finally, the Government wanted to ‘turbo charge’ its levelling-up agenda through the creation of tax advantaged investment zones around the country – 100% business rates relief, full stamp duty relief, zero employer’s National Insurance for a worker earning up to the basic rate and uncapped first year capital allowances and enhanced buildings allowance relief. The evidence of success of such enterprise zones will only be known when they eventually come live (if they do at all).”
He added, “Kwarteng was bold in his assertions that he wanted a simpler, more dynamic and fairer tax system, and you could say he backed that up with his box of tax cutting tricks. “Rest in peace” the Office of Tax Simplification – I’m not sure it has left much of a legacy with the UK tax code now the longest in the world, and arguably one of the most complicated.
“Remember, today’s ‘mini’ Budget was the warm-up with a fuller Budget statement, supported by OBR forecasts expected in November. Today’s tax cuts will easily amount to over £50 billion and there are questions already about whether the country can really afford this.”