UK mini-budget 2022 - International
The UK government held its mini-budget on 23 September 2023 (referred to by the government as its “Growth Plan”), and it involved a significant package of corporate and personal tax cuts. Among the most significant changes announced are the following:
Planned corporation tax increase cancelled
The planned corporation tax increase to 25%, which was due to take effect from April 2023, has been cancelled. As a result, the UK corporation tax rate will remain at 19%.
As a result of the cancellation, the Diverted Profits Tax rate will remain at 25%.
Reduction in national insurance contributions
The recent increase in employer and employee national insurance contributions (of 1.25%) is to be reversed from 6 November, and the planned introduction of the Health and Social Care Levy from April 2023 (which was due to replace the recent rise in national insurance contributions) is being repealed.
The dividend tax increase of 1.25% that was also due to take effect from April 2023 is also being reversed.
Reduction in income tax rates
The 1% cut to the basic rate of income tax will be brought forward, with the effect that the basic rate will be 19% from April 2023. Whilst this hasn’t been confirmed yet, this may be relevant to withholding tax as well, because the UK’s withholding rates generally operate by reference to the basic rate of income tax. That said, the UK’s wide treaty network generally means that the full withholding rax rate is not often applied (and there is generally no withholding tax on dividends either).
The additional rate of income tax of 45%, that applies to taxable income above GBP150,000, is being removed from April 2023. This means that the top income tax rate will be 40%.
Repeal of IR35 off-payroll working reforms
In a significant U-turn, the government has announced that the reforms made to the IR35 off-payroll working rules in 2017 for the public sector and in 2021 for the private sector will be repealed from 6 April 2023. From this date, workers across the UK providing their services via an intermediary, such as a personal service company, will once again be responsible for determining their employment status and paying the appropriate amount of income tax and national insurance contributions.
Introduction of “Investment Zones” with tax incentives
The government has announced the intention to introduce “Investment Zones” across the UK. Areas with Investment Zones will benefit from tax incentives, planning liberalisation and wider support for the local economy. Businesses in designated sites will benefit from time-limited tax incentives over ten years, including 100% relief from business rates, enhanced capital allowances, employer national insurance contributions relief and relief from stamp duty land tax.