Mini-budget 2022: Tax cuts and other key measures unveiled by Chancellor

MSE_Laura_F

https://www.youtube.com/watch?v=5jbWLWhr9E8

Chancellor Kwasi Kwarteng has announced big tax cuts for individuals and businesses including a major shake-up to income tax. The change comes as part of today's mini-budget, with other key announcements.

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Mini-budget 2022: Tax cuts and other key measures unveiled by Chancellor to combat the cost of living crisis

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Clive_Woody

Was there mention of addressing the 60% tax bracket or was this overlooked again?

Dazed_and_C0nfused

No mention of any changes to the span of the tax bands or HICBC threshold.

Graywisdom

The reduction in Income Tax next April is welcome, but any wage increase will mitigate this reduction due to the fact that the Personal Tax Allowance of £12750 is still frozen until 2026. Surely this could also have been increased in line with inflation?

bamgbost

I thought there was to be an increase in the tax rate @ 40%. This surely needs to move up to 55k or so, no?

Grumpy_chap

bamgbost said:

I thought there was to be an increase in the tax rate @ 40%. This surely needs to move up to 55k or so, no?

There was rumour that the upper end of the basic rate band would be raised significantly - £80k was a figure often referenced.  That appears not to have been implemented.

The elimination of the 45% band is a simplification but the two 60% bands (HICBIC withdrawal and personal allowance withdrawal) still seem to remain.  Resolving those would have been far greater impact in terms of simplifications.

[Deleted User]

Grumpy_chap said:

bamgbost said:

I thought there was to be an increase in the tax rate @ 40%. This surely needs to move up to 55k or so, no?

There was rumour that the upper end of the basic rate band would be raised significantly - £80k was a figure often referenced.  That appears not to have been implemented.

The elimination of the 45% band is a simplification but the two 60% bands (HICBIC withdrawal and personal allowance withdrawal) still seem to remain.  Resolving those would have been far greater impact in terms of simplifications.

Agreed - haven’t made any calculations but something like charging 45% on income over £100000 with the restoration of the personal allowance might have been an option. Just a thought!

hoc

Interesting experiment this Trussonomics. We may as well go for broke, why hold back? Have the BoE cut rates as a next step, bring the pound down more to fuel growth from all our exports.

AJRBADGER

As a project manager in the energy sector, I'm hopeful the IR35 reversal starts making recruitment easier. I've been seeing projects delayed as we can't recruit.

Whilst I've never been ltd company, or a contractor and I'm well aware that IR35 is essentially a tax dodge. For the bean counters above me, it was a way to give contract workers the going rate without spending that much, and kept flexibility in the contact sector. It also IMO masked the problem the UK has with low engineering pay. I absolutely rely on contractors to complete the projects I'm responsible for.

Certainly, for example, trying to find engineers and technicians to go and work a 4mth contract on a wind farm in Shetland has been a challenge when the contract was inside IR35, and the shortage of willing workers hasn't been translating to an increase in wage budgets.

MouldyOldDough

The Chancellor is an idiot - spending OUR money on the rich - when the economy is about to implode

RevT

Graywisdom said:

The reduction in Income Tax next April is welcome, but any wage increase will mitigate this reduction due to the fact that the Personal Tax Allowance of £12750 is still frozen until 2026. Surely this could also have been increased in line with inflation?

It's £12570. Hugely important point. We'll don't get the September CPI figure until Oct 19th but we know it will be around 10%. So Sunak's Personal allowance Freeze means it won't get the £1257 CPI rise in the personal allowance, meaning everybody earning more than £13,827 will lose out in real terms by £250. 

Balancing this freeze with the 1% reduction in the basic income tax rate  means you have to earn more than £37,570 before there is any real terms reduction in income tax!! Unless Kwarteng restores the personal allowance link to inflation.

There are other ways people lose out with the 20% to 19% cut. Tax relief on pension contributions is reduced as it paid at the the basic rate of income tax. So the governments contribution to your pension pot will be 5% less. Similarly Gift Aid to charities will be reduced.