Business tax
Corporation tax - as previously trailed the rate of corporation tax will remain at 19% for all profits and not increase to 25% in April 2023. In line with the freeze in the main rate, the Diverted Profits Tax rate will remain at 25%.
Banking Corporation Tax Surcharge - as a result of the maintenance of the corporation tax rate at 19%, the scheduled change to the rate of the Bank Corporation Tax Surcharge will be cancelled. From April 2023 banks and building societies will continue to pay an additional 8% rate of tax on their profits.
Investment zones - new Investment Zones across England will be set up, with funding for the devolved administration to allow them to introduce equivalent areas. Areas with Investment Zones will benefit from tax incentives, planning liberalisation, and wider support for the local economy. The tax incentives (similar to freeports) intended to be included are:
- Business rates – 100% relief from business rates on newly occupied business premises, and certain existing businesses where they expand in English Investment Zone tax sites.
- Enhanced Capital Allowance – 100% first year allowance for companies’ qualifying expenditure on plant and machinery assets for use in tax sites.
- Enhanced Structures and Buildings Allowance – accelerated relief to allow businesses to reduce their taxable profits by 20% of the cost of qualifying non-residential investment per year, relieving 100% of their cost of investment over five years.
- Employer National Insurance contributions relief – zero-rate Employer NICs on salaries of any new employee working in the tax site for at least 60% of their time, on earnings up to £50,270 per year, with Employer NICs being charged at the usual rate above this level.
- Stamp Duty Land Tax – a full SDLT relief for land and buildings bought for use or development for commercial purposes, and for purchases of land or buildings for new residential development.
Capital Allowances - the temporary annual investment allowance (AIA) will become permanent at £1m.
Adjusting super-deduction rules - some of the technical provisions for the super-deduction will be amended as a consequence of the Corporation Tax rate being retained at 19% from 1 April 2023. This will make sure that the relief continues to operate as intended. The availability of super deduction is still expected to end on 1 April 2023. There has been consultation on the reform of capital allowances, but we have not yet seen the response from the Government (expected in the full Budget in the Autumn).
National Insurance Contributions / The Health and Social Care Levy – the Health and Social Care Levy is cancelled through a Bill introduced on 22 September 2022. This Bill cancels the planned introduction of the Health and Social Care Levy which was due to be introduced from 6 April 2023 and repeals the 1.25% employers NIC rate increase with effect from 6 November 2022 for payments of earnings to (non-director) employees and for relevant termination awards and sporting testimonial payments. Where NIC is payable on an annual basis, new blended rates are to be applied to deliver a similar economic effect.
Repealing off-payroll working reforms - the 2017 and 2021 reforms to the off-payroll working rules (IR35) will be repealed from 6 April 2023. This means that, 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.
Personal tax
Higher rate tax - the additional rate of income tax (45%) will be removed from April 2023. This change does not automatically apply in Scotland where the Scottish Government sets the income tax rates and bands applying in Scotland.
Basic rate Tax - the basic rate of income tax will be cut by 1% (from 20% to 19%) from April 2023. This change does not automatically apply in Scotland where the Scottish Government sets the income tax rates and bands applying in Scotland.
Bankers bonus cap - the Prudential Regulation Authority will remove the current cap to bankers’ bonuses (current cap limits remuneration of certain bank staff to 100% of their fixed pay (or 200% with shareholder approval)).
National Insurance Contributions / The Health and Social Care Levy - the changes noted above also reduce employees’ NIC by 1.25% from 6 November 2022 and repeal the proposed 1.25% Health and Social Care Levy which was to apply from 6 April 2023.
Dividend Tax - the 1.25% increase in dividend tax rates will be reversed applying UK-wide from 6 April 2023.
Stamp taxes
Stamp Duty Land Tax - the Stamp duty land tax (SDLT) threshold above which SDLT must be paid will be increased to £250,000 (current threshold is £125,000). In addition, for first time buyers, the threshold on which they pay residential SDLT will increase will become payable on properties on or above £425,000 (currently £300,000) and the maximum value of a property on which first-time buyers relief can be claimed will also increase to £625,000 (from £500,000)
Indirect taxes & Duties
Alcohol duty rates and Alcohol duty reform - the duty rates for all categories will be frozen from 1 February 2023. A response to the consultation on the new alcohol duty system and draft legislation has been released and a new consultation on some further technical issues has been launched. The reforms will be implemented from 1 August 2023.
VAT free shopping for overseas visitors - a new digital, VAT-free shopping scheme will be introduced. A consultation will gather views on the approach and design of the scheme. The new VAT-free shopping scheme for non-UK visitors to Great Britain will enable them to obtain a VAT refund on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage.