UK mini-budget 2022 - Employment and Pensions
In delivering his mini-budget 2022 (referred to by the government as its “Growth Plan”), the Chancellor announced on 23 September 2022 a wide-ranging series of tax cuts and reforms, with a focus on incentivisation, investment and making Great Britain more competitive on the global stage.
Key employment and pensions related announcements include the following:
IR35
In a significant (and unexpected) 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made to the IR35 off payroll working rules in 2017 for the public sector and in 2021 for the private sector will be repealed from 6 April 2023.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 tax and NICs.
National insurance contributions
The recent 1.25% rise in national insurance contributions will be reversed with effect from 6 November.
Health and Social Care Levy
The planned Health and Social Care Levy which was due to replace the national insurance rise as a new standalone tax from April 2023, has been cancelled to boost the incentives for work and enterprise.
Investment zones and employer national insurance contributions
New investment zones will be introduced across the UK. Employers of new employees working in these investment zones for at least 60% of their time will benefit from zero-rate employer national insurance contributions on earnings of up of GBP50,270 per year.
Basic rate of income tax cut
The government will bring forward the 1% cut to the basic rate of income tax to April 2023, 12 months earlier than planned.
A one year transitional period will also be introduced for relief at source pension schemes, permitting them to continue claiming tax relief at the 20% rate.
Additional rate of income tax
As part of the government’s commitment to lower taxes and simplify the system – and to improve the attractiveness of the UK as a place to work relative to other countries – the additional rate of income tax will also be removed from April 2023. This will apply to the additional rate of non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland.
The additional rate for savings, dividends and the default additional rate will also be removed from April 2023, and this change will apply UK-wide.
Pension charge cap
The government has brought forward draft regulations to reform the pensions regulatory charge cap, giving defined contribution pension schemes the clarity and flexibility to invest in the UK’s most innovative businesses and productive assets creating opportunities to deliver higher returns for savers.
Dividend tax rates
The government has reversed the 1.25% increase in dividend tax rates from April 2023, with the intention of supporting entrepreneurs and investors across the UK to drive economic growth. The dividend additional rate will also be removed to align with the dividend upper rate, which is being reduced to 32.5% from 6 April 2023.
Company share option plans
From April 2023, qualifying companies will be able to issue up to GBP60,000 of CSOP options to employees (double the current GBP30,000 limit), with restrictions on share classes within CSOP also being eased to better align the scheme rules with the rules in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies.
