A clear change in direction as Kwarteng targets growth
Zoe Roberts is tax partner at BHP Chartered Accountants in Leeds:
Before today we were wondering what a “mini Budget” might be, after Kwasi Kwarteng’s speech this morning it is now clear that it is a half hour unveiling of possibly the widest raft of tax changes that have been announced in some years, heralding a clear shift in direction to a low tax, low state system with the aim of taking the brakes off business to create economic growth.
Business will be welcoming the cancellation of the Corporation Tax increase and the permanent increase to £1m for the Annual Investment Allowance limit which gives 100% tax relief for expenditure on plant and machinery. Small start ups will also welcome the announcements of expansion of the Seed Enterprise Investment Scheme and Company Share Ownership Plans although little detail of these has yet been seen.
There was a clear move to remove red tape with the abolition of the Office of Tax Simplification and the repeal of the off payroll working legislation and further simplifications are expected in regard to planning, agriculture and digital sectors.
Investment Zones will be set up which will offer lower taxes in the forms of no business rates, no Stamp Duty Land Tax on purchase, no employers NI for new employees up to £50k and enhanced capital allowances for both plant and buildings. The exact locations of these has yet to be decided and so the overall impact to growing the economy may not be far reaching.
The abolition of the 45% additional rate of income tax and the lowering of National Insurance will please the higher paid individuals, whilst those paying tax at the basic rate will welcome the acceleration of the reduction from 20% to 19% from 6 April 2023 as opposed to the planned reduction in April 2024.
The reduction in stamp duty land tax for first time buyers, the help announced to assist with energy bills for businesses and individuals and the cut to alcohol duties will help with cost of living increases but time will tell whether these will be sufficient cuts and just how affordable they are for the Government.
Overall, it remains to be seen whether this significant shift in policy will create the growth that the economy needs, and with an election in two years the clock is ticking.