In advance of the Chancellor’s mini-Budget, it was rumoured that he might bring forward the proposed cut in the basic rate of income tax to 19% by one year to April 2023. This he did. But in a further development, he announced the abolition of the 45% additional rate of income tax, from April 2023, on annual taxable income above £150,000 so that there will be a single higher rate of income tax at 40% (subject to the rates of income tax set in Scotland). There is, however, nothing said about the withdrawal of the personal allowance related to taxable income over £100,000 or the recovery of child benefit, meaning that marginal rates of tax could be higher than 40%.

This abolition of the additional rate of income tax will apply to the additional rate on non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland. The additional rate for savings and dividends as well as the default rates will also be removed from April 2023, and this change will apply UK-wide. As the additional rate of income tax will be removed current additional rate taxpayers will also benefit from the Personal Savings Allowance of £500 for higher rate taxpayers.

A four-year transition period for Gift Aid relief will apply, to maintain the income tax basic rate relief at 20% until April 2027. There will also be one-year transitional period for Relief at Source (RAS) pension schemes to permit them to continue to claim tax relief at 20%.

The most imminent change is the reversal of the National Insurance rise previously brought in from April 2022. On 22 September, the Health and Social Care Levy (Repeal) Bill was introduced to Parliament. It is due to have all its remaining stages in the Commons heard on 11 October, the first day after the conference recess. In accordance with the Bill, the 1.25% National Insurance rate increase that came into effect from April 2022 will cease to have effect for earnings made after 6 November 2022, though it will still have effect for earnings made before that date. There is no specific anti-forestalling provision addressing earnings being pushed back until after 6 November 2022, though the legislation is driven by the date earnings are made and not the date they are paid. There is a blended rate for Class 1A contributions, taking account of the 1.25% increased rate for seven months.

HMRC appreciates that the timeline for changes by 6 November is tight and that some employers may not be able to implement the changes in time. HMRC will be directing employees to their employers to correct any overpaid NICs in the first instance and the accompanying press release notes that some employees may not see the benefit of the change until December or January 2023.

There are also changes to the NICs to be paid by directors. A director who is paid annually on or after 6 November will apply a blended rate of NICs (as with Class 1A contributions). The Primary Threshold (PT) for 2022-23 for directors has also changed to £11,908 which will apply for the whole of the 2022-23 tax year. This will mean that where payroll has been run previously using the original PT for 2022-23 the increased PT will be used in later payroll calculations, and may mean that NICs overpaid in those pay periods will be offset against a future payroll. Where the director has a pro-rata annual earnings period the annual PT of £11,908 will need to be adjusted according to the existing rules for pro-rata annual earnings periods for directors.

The increase in the dividend tax rates of 1.25% which was brought in alongside the National Insurance rise in April 2022 will be reversed with effect from 6 April 2023. This may tempt owner-managed businesses to defer dividends until 6 April or later and have the company lend the amount of any anticipated dividends with the loan being cleared on payment of the dividend. However, this may trigger issues with the loans to participator rules in s455 CTA 2010.

The 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023. From this date, the Government notes 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. For services provided before 6 April 2023, the current rules will still apply, even where the payment is made on or after 6 April 2023.

There was no reference at this point to any ‘unfreezing’ of the income tax personal allowance, the higher rate threshold, the lifetime allowance for pensions or the inheritance tax limits, though some of these may be addressed in the next Budget. There was also no mention, as yet, of the rumoured ‘opt-in’ system allowing all members of the same household (not just married couples) to share their full personal allowances (the current limit under the marriage allowance is £1,260).

Bankers’ bonus cap to be abolished: The Prudential Regulation Authority will remove the current cap which limits remuneration of certain bank staff to 100% of their fixed pay (or 200% with shareholder approval). As further details (including timing) emerge, firms impacted by the cap will need to consider their current remuneration structures especially in light of year-end bonus and salary decisions.  Further regulatory reform is also promised for later in the year.

Pension charge cap: The government will also bring forward draft regulations to remove certain performance fees from the occupational defined contribution pension charge cap, with a view to driving higher potential investment returns for savers and unlocking investment into the UK’s most innovative businesses and productive assets.

Planning reform for infrastructure projects: The Growth Plan also refers to the new Planning and Infrastructure Bill which is designed to accelerate priority major infrastructure projects across England. There are sector-specific changes to accelerate infrastructure delivery, including: bringing onshore wind planning policy in line with other infrastructure to allow it to be deployed more easily in England; reforms to accelerate road delivery through more streamlined consent processes; and giving telecoms operators easier access to telegraph poles on private land.

The government has said it will introduce a modern, digital, VAT-free shopping scheme for non-UK visitors with the aim of providing a boost to the high street and creating jobs in the retail and tourism sectors. The delivery will include modernising the scheme that currently operates in Northern Ireland and introducing a new digital scheme in Great Britain. A consultation will be launched to gather views on the approach and design of the scheme, to be delivered as soon as possible.

The government will freeze the alcohol duty rates for all categories from 1 February 2023 to support businesses and help consumers with the cost of living. The response to the consultation on the new alcohol duty system and draft legislation that will underpin the changes was also published on 23 September along with a consultation on some further technical issues. Policies contained within the response document include amendments to draught relief, more detail on small producer relief and detail of a transitional easement for the wine industry. The reforms will be implemented from 1 August 2023. HMRC is also running a small producer survey to enable a greater understanding of economies of scale across the industry. The survey will be open for four weeks to 21 October 2022.