It’s been a turbulent few weeks in Westminster, which has seen a mini budget, U-turns and two chancellors.
This is what remains in place from the mini budget and how it impacts traders and businesses.
As it stands, new chancellor Jeremy Hunt is due to deliver the government’s medium-term fiscal plan on 31 October. However, this is subject to change following Liz Truss’ resignation as Prime Minister.
Corporation Tax will go up from 19% to 25% from April.
Corporation tax is applied to the profits earned by limited companies – not sole traders or partners.
This increase was always due to happen, however it was reversed by Kwarteng during the mini-budget, and then U-turned by the new chancellor Jeremy Hunt.
Companies that earn less than £50,000 profit will not see any increase and will continue to pay corporation tax at 19%.
- Find out more: small businesses tax - what you need to pay?
Jeremy Hunt confirmed that the basic rate of income tax would remain at 20%.
This means working-age people pay 20% tax on income above the personal allowance of £12,570.
Just a few weeks before, the former chancellor Kwasi Kwarteng announced plans to cut it from 20% to 19% from April 2023.
However, Mr Hunt said it would not take place at all ‘until economic pressures improve’.
The mini-budget also set out plans to abolish the additional rate of income tax – 45% on incomes over £150,000 – from April 2023. However, this plan was shelved at the beginning of October.
- Find out more: income tax calculator
National Insurance cuts
Last year, Boris Johnson announced the health and social care levy, which saw National Insurance (NI) contributions rise by 1.25 percentage points in April to raise funds for the NHS and to tackle the social-care crisis.
However, Liz Truss pledged to cut this with rates going back to 12% if she became Prime Minister.
This is one of the few budget proposals that has remained in place. From 6 November, the rate employees pay on earnings between £12,570 and £50,270 will drop back down to 12%, from its current rate of 13.25%. You'll pay 2% on earnings above £50,270, down from 3.25%.
- Find out more: national insurance explained
If you own shares in a company, there are two ways you can earn money: from selling the shares if they grow in value or from dividends paid by the company, if it chooses to distribute profits to shareholders.
The basic rate of dividend tax is paid by those investors who receive over £2,000 a year in dividend income.
Under plans set out by former chancellor Kwasi Kwarteng last month, the rates for basic-rate and higher-rate taxpayers would have been reduced by 1.25%, and the additional rate dividend tax rate would have been abolished.
However, this has now been scrapped by Hunt, so dividend rates remain at the following levels:
- Basic rate: 8.75%
- Higher rate: 33.75%
- Additional rate: 39.35#
Find out more: Dividend tax explained
Support with energy bills
One of Liz Truss’ first acts as Prime Minister was to announce the Energy Bill Relief Scheme to help consumers and businesses with the price of energy this winter.
It means the government provides a discount on wholesale gas and electricity prices for all non-domestic customers (including all UK businesses; the voluntary sector, such as charities; and the public sector, such as schools and hospitals).
It’s equivalent to the Energy Price Guarantee put in place for households.
It applies to fixed contracts agreed on or after 1 April 2022, as well as deemed, variable and flexible tariffs and contracts. It applies from 1 October to 31 March, running for six months, and is applied automatically to bills.
The level of price reduction for each business will vary depending on their contract type and circumstances.
A parallel scheme – based on the same criteria and offering comparable support, but recognising the different market fundamentals – will be established in Northern Ireland.
This policy for business has not changed. It was always due to run for an initial six months, unlike the Energy Price Guarantee for households, which was recently cut from two years to six months by Hunt.
- Find out more: how to reduce your energy bills
In September, Kwarteng announced a repeal of IR35 – referring to off-payroll working rules that aim to ensure contractors doing work for companies are paying the correct level of tax – from April 2023.
These rules were introduced to the public sector in April 2017 and came into force in the private sector in April 2021.
The new Chancellor reversed that plan, and current IR35 rules will remain in place.
- Find out more: cost of living news and advice