The chancellor today announced a reduction in income tax and stamp duty, a tax paid by those who buy real estate.
Although the government refused to call his speech a budget, researchers said his measures represented “the biggest fiscal event of tax cuts since Nigel Lawson’s 1988 budget”. Our concise guide to mini budget states the effects of its actions on your finances.
The additional income tax rate of 45 percent will be abolished. The highest income tax rate will therefore be 40%.
The basic income tax rate will be reduced from 20% to 19% next year, i.e. 12 months earlier than planned.
These changes do not apply to Wales and Scotland, where the additional rate remains and is currently 46%. Rates in Northern Ireland are aligned with rates in England, so taxpayers in the province will benefit from the cuts announced today.
The chancellor has pledged to put tax simplification at the heart of government. “We will review the tax system to make it simpler and fairer,” he said. “We will incorporate tax simplifications into the government,” he added, which is why the Office for Tax Simplifications will be abolished.
The government has already confirmed that it will repeal raising national insurance rates by 1.5 percentage points introduced by Mr. Kwarteng’s predecessor, Rishi Sunak.
“We are reducing stamp duty,” the chancellor said. The tax-free band doubles from £125,000 to £250,000. It will be £425,000 for first time buyers. He said 200,000 people will not pay stamp duty as a result. All are permanent changes and take effect today.
He also promised to reform the hated “IR35” tax rules for the self-employed, which will allow them to be taxed as if they were employed. System reforms introduced in 2017 and last year will be abolished.
A rise in tax rates on dividend income linked to a rise in National Insurance rates will also be reversed. Abandoning the corporate tax increase also means that investors who own stocks will keep a larger portion of the profits of the companies in which they invest.
Investors will have the option to put money into more specialized funds by removing the cap on fees for some schemes.
Low corporate tax rates also benefit landlords who own property through limited companies.
The chancellor said the unemployed over 50s would receive additional help, although he did not give details.
Tax on alcohol
The link with inflation will be broken.
Working mothers claiming benefits
Part-time workers who claim Universal Credit will be forced to work longer hours or risk having their benefit cut. Mothers are likely to be particularly affected.