Last week the Chancellor delivered his first announcement which was the mini-budget. There were a number of policy changes and many of them have a big impact on small business owners. Here is a summary of what this means for you and your business.
Cuts to Income Tax rate
The basic rate of Income Tax for England and Northern Ireland will also be cut from 20% to 19% from April 2023.
The top rate of Income Tax – the additional rate on income of £150,000 or higher at 45% in all parts of the UK except for Scotland – will be scrapped from April 2023 in England, Wales and Northern Ireland. This means that the top rate of Income Tax will be 40%.
National Insurance rate increase reversed
In April we saw the rates of National Insurance (NI) increased by 1.25% for one year. The increase will be reversed from 6th November 2022.
Employees whose NI is calculated on a monthly basis will see the changes take effect from their first pay packet after 6th November. HMRC has advised that self-employed people who pay NI on an annual basis will pay revised annualised rates of NI.
Increase in tax rate on dividends reversed
April also saw an increase in the rate of Income Tax charged on dividend income by 1.25%. This will now be reversed from April 2023, meaning dividends will be taxed at 7.5% and 32.5% for basic rate and higher rate taxpayers.
Cancellation of corporation tax rise
The rate of Corporation Tax was due to increase to 25% in April 2023 but this has now been scrapped and will now remain at 19%.
IR35 to be simplified
Changes made between 2017 and 2021 will now be scrapped, meaning the contractor will now determine whether their work comes under IR35. The contractor will be responsible for determining their employment status and paying the appropriate amount of tax and national insurance contributions.
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