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

norsefox

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 does seem that the position is untenable given huge inflation.  As a Scottish tax payer, our system is even more convoluted and incredibly burdensome, so some simplification across the board (for both UK and Scottish tax systems) would be greatly welcomed.

No doubt, we'll simplify in some areas and complicate in others.  I suppose the next 18 months will be yet more mess, and only 2024's election will provide an opportunity to fix this.

Dazed_and_C0nfused

RevT said:

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.

Not for everyone.  In the first year relief at source pension contributions will still get 20% relief and for the next 4 years Gift Aid will retain 20% relief.

overlooked

Who is fighting for the pensioners? The triple lock was broken last year. Inflation keeps rising. Energy bills are massive. And yet nothing was mentioned for them in this mini budget. Cutting income tax by 1% has a minimal effect on a pension income. But this gets overlooked with most need items. Something needs to be done.

[Deleted User]

Dazed_and_C0nfused said:

RevT said:

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.

Not for everyone.  In the first year relief at source pension contributions will still get 20% relief and for the next 4 years Gift Aid will retain 20% relief.

Indeed. Pedantic perhaps, but a reduction in the basic rate after that first year reduces the government contribution by 6.2% not 5%. An £800 contribution will be increased by £187.65 as opposed to £200.

biscan25

Resolution Foundation have carried out some analysis, showing that the break even point for paying less tax under this budget is £155k, including the allowances freeze. So the top 1% gain, by a lot, everyone else loses.

One thing that sticks out for me is the binning of the off-payroll working rules. IR35 will remain, but again up to the contractor to determine inside or outside. I might go back into contracting...

biscan25

overlooked said:

Who is fighting for the pensioners? The triple lock was broken last year. Inflation keeps rising. Energy bills are massive. And yet nothing was mentioned for them in this mini budget. Cutting income tax by 1% has a minimal effect on a pension income. But this gets overlooked with most need items. Something needs to be done.

Pensioners have a greater share of wealth than any other group, which they could put to use if required. They have also benefitted greatly through the triple lock in the last decade, where pension increases have outstripped earnings increases.

Pensioners have also been given substantial help through the cost of living payments.

If the government wanted to help pensioners further, they should do so by uprating pension credit IMO.

Grumpy_chap

I'd like to understand the scrapping of the IR35 reforms - will it mean back to the position as at January 2020?

I was intrigued by this comment:

AJRBADGER said:

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.

There is a shortage of skilled engineers, and it is a challenge I have at the moment but posts can be filled if the overall package is correct. 
Short contracts attract higher rates.
Inaccessible work locations attract higher rates.
There was a post elsewhere in the forum where someone was berating the inability to fill posts, but they mentioned the rate being offered and the reason the posts cannot be filled was obvious.
Regardless of IR35, for contract staff and on-the-books staff, we are needing to over higher rates than a year ago plus offer flexible working plus longer commitment for the contract roles. 
What is the short contract at a challenging location in Shetland offering to mitigate those elements?

overlooked said:

Who is fighting for the pensioners? The triple lock was broken last year. Inflation keeps rising. Energy bills are massive. And yet nothing was mentioned for them in this mini budget. Cutting income tax by 1% has a minimal effect on a pension income. But this gets overlooked with most need items. Something needs to be done.

I understand pension triple lock has been restored this year, so that will mean a 10% uplift.  How does that compare to salaries and benefits?
There are also the energy grants available, which I think are greater for pensioners than the "everyone" support - some of that may be means-tested but I have not heard that to be the case (as I have not paid a great deal of attention to the detail).

AJRBADGER

Grumpy_chap said:

I'd like to understand the scrapping of the IR35 reforms - will it mean back to the position as at January 2020?

I was intrigued by this comment:

AJRBADGER said:

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.

There is a shortage of skilled engineers, and it is a challenge I have at the moment but posts can be filled if the overall package is correct. 
Short contracts attract higher rates.
Inaccessible work locations attract higher rates.
There was a post elsewhere in the forum where someone was berating the inability to fill posts, but they mentioned the rate being offered and the reason the posts cannot be filled was obvious.
Regardless of IR35, for contract staff and on-the-books staff, we are needing to over higher rates than a year ago plus offer flexible working plus longer commitment for the contract roles. 
What is the short contract at a challenging location in Shetland offering to mitigate those elements?

overlooked said:

Who is fighting for the pensioners? The triple lock was broken last year. Inflation keeps rising. Energy bills are massive. And yet nothing was mentioned for them in this mini budget. Cutting income tax by 1% has a minimal effect on a pension income. But this gets overlooked with most need items. Something needs to be done.

I understand pension triple lock has been restored this year, so that will mean a 10% uplift.  How does that compare to salaries and benefits?
There are also the energy grants available, which I think are greater for pensioners than the "everyone" support - some of that may be means-tested but I have not heard that to be the case (as I have not paid a great deal of attention to the detail).

As said I'm the project manager (and ex-engineer). In raw terms - I say what I need, and the money people give me a budget.

Absolutely - the rate being offered is the issue, and shortage of supply/willingness has not led to an increase in rates being offered. Admittedly Covid has skewed this, but there is no willingness to increase wage budgets. Nobody is wanting to work a contract in Shetland, working 84hr weeks for the rates we are offering, hence why we cannot man the project. The rates we are offering are in the ball park of what similar roles would have paid when I started my career in the late 90s/early 00s - and I'm not exaggerating that.

My experience is that the money people are not wanting to pay anymore than they were pre IR35. A mistake many make is thinking IR35 was for the benefit of the worker, when really it was a way for the employer/client to pay the going rate on the cheap. It would never be a thing if it was anything else - and I say that as somebody who has always been a PAYE employee.

We have lost contract engineers to projects abroad. For example, a close friend has went to Canada, doing the same job, and doubled his take home wage - without requiring a tax dodge or working silly hours to achieve that. He isn't on anything particularly lucrative either, just the going rate.

Grumpy_chap

AJRBADGER said:

Absolutely - the rate being offered is the issue, and shortage of supply/willingness has not led to an increase in rates being offered. 

This is across the board, though, not just engineering.
Employers don't seem to understand that, despite all the economic challenges, we have a very high level of employment coupled with an unusually high number that could / would have expected to be working but removed themselves voluntarily from the labour market.  When rates are low, that latter group won't be encouraged back to the labour market.

I actually just saw a notice in the window of a national retailer advertising for "Senior Retail Assistant and Team Leader" (sounds senior) at the rate of £10.05.  So, a regular Retail Assistant (not a Team Leader) must be on NMW.  It is fair to expect business to pay at least Living Wage...

Fortunately, Bankers can now have large bonuses - I see a return for Harry Enfield:
https://www.youtube.com/watch?v=ON-7v4qnHP8

sheramber

Grumpy_chap said:

I'd like to understand the scrapping of the IR35 reforms - will it mean back to the position as at January 2020?

I was intrigued by this comment:

AJRBADGER said:

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.

There is a shortage of skilled engineers, and it is a challenge I have at the moment but posts can be filled if the overall package is correct. 
Short contracts attract higher rates.
Inaccessible work locations attract higher rates.
There was a post elsewhere in the forum where someone was berating the inability to fill posts, but they mentioned the rate being offered and the reason the posts cannot be filled was obvious.
Regardless of IR35, for contract staff and on-the-books staff, we are needing to over higher rates than a year ago plus offer flexible working plus longer commitment for the contract roles. 
What is the short contract at a challenging location in Shetland offering to mitigate those elements?

overlooked said:

Who is fighting for the pensioners? The triple lock was broken last year. Inflation keeps rising. Energy bills are massive. And yet nothing was mentioned for them in this mini budget. Cutting income tax by 1% has a minimal effect on a pension income. But this gets overlooked with most need items. Something needs to be done.

I understand pension triple lock has been restored this year, so that will mean a 10% uplift.  How does that compare to salaries and benefits?
There are also the energy grants available, which I think are greater for pensioners than the "everyone" support - some of that may be means-tested but I have not heard that to be the case (as I have not paid a great deal of attention to the detail).

As a  pensioner  not in receipt  of any additional benefits, the only extra over the amounts given to everybody will be the £300 heating allowance.

I don't pay NI so that makes no difference.