Mini-Budget: Top implications for individuals

As of 17/10/22, Chancellor Jeremy Hunt has announced new budget plans.  To view our latest budget information, click here.

The new Chancellor, Kwasi Kwarteng, recently delivered his first Mini-Budget Statement.  We outline the top implications for individuals below. 

Income Tax and National Insurance cuts  

The big news for individuals is the reversal of the additional 1.25% increase to National Insurance that took effect in April 2022, with the planned Health and Social Care Levy due to commence in April 2023, also being scrapped.  

According to the Government, this measure will see 28 million people better off by, on average, £330. As the increase was a flat 1.25% on all salaries and unincorporated business profits, it stands to reason that high earners will benefit the most, with an employee earning £100,000 benefitting by £1,093 per year, whilst an individual on a salary of £20,000 is only £93 better off.  

As the change comes part way through the tax year, a hybrid rate of Class 1A National Insurance of 14.53% will apply to 2022/23 benefits in kind, such as private medical insurance, and Directors will also be subject to a hybrid rate.  

Given the increase in the National Insurance threshold to £12,570 from July 2022, employees’ net salaries will be higher than they were before the introduction of the additional 1.25%. 

The same 1.25% reduction applies to Class 4 NIC charged on the trading profits of unincorporated businesses, which will also have a hybrid rate for the 2022/23 tax year of 9.73% (main rate) and 2.73% (higher rate).  

The basic rate of Income Tax will reduce from the current 20% to 19% with effect from 6 April 2023. 

The combined effect of these changes is that the highest earners will see a 6.25% reduction in tax rates, whilst those on lower incomes will see a reduction of 2.25%.   

There is a further boost in store for those who wholly or partly remunerate themselves by way of dividends. From 6 April 2023, the rates of dividend tax will drop 1.25% to 7.5% for basic rate taxpayers and 32.5% for higher rate taxpayers, with the additional dividend tax rate also abolished. For someone earning a salary of £12,570 and receiving dividends to utilise their full basic rate band, the tax burden will be £2,827, considerably lower than someone being paid a salary, although Corporation Tax payable by a Company would need to be factored in.’

Stamp Duty Land Tax 

Kwasi Kwarteng confirmed that there will be a permanent change to the Stamp Duty Land Tax (SDLT) rates for purchases of residential property in England and Northern Ireland. 

The changes, which take effective from today (23 September), increase the 0% threshold from £125,000 to £250,000, abolishing the 2% rate of SDLT that was payable on this amount. For a property with a purchase price of more than £250,000 buyers will save £2,500 in SDLT. 

Whilst not yet clear, it is expected that this increase in threshold will also apply to purchases where the surcharge rate applies, passing the same saving to those purchasing residential property via a company and those who own more than one property. 

First-time buyers will also benefit from an increase in the thresholds of First Time Buyers’ Relief. Previously first-time buyers would pay no SDLT on property up to £300,000 if a property was valued under £500,000. These thresholds have increased to £425,000 and £625,000 respectively. 

How these changes will impact the property market is difficult to predict at this stage. However, those already in the process of purchasing residential property in England and Northern Ireland will no doubt be grateful for the reduction in costs in an already expensive process. 

As always, details on some of these measures will follow.

If you would like to discuss any of the topics outlined in this article following the Mini-Budget, please get in touch.