October 3rd, 2022
The new chancellor, Kwasi Kwarteng, has delivered a mini budget containing the largest package of tax cuts in 50 years. Here are some of the key changes, and how they could impact you.
What is the impact on people’s income?
The chancellor’s mini budget announcement is underpinned by widespread tax cuts that are set to impact millions across the country. Income tax is being reduced by 1p in the pound from April 2023, falling to 19%. According to The Treasury, this move will see an estimated 31 million people receiving £170 more per year.
The government also announced a reversal of the 1.25 percentage point rise in national insurance contributions. This change means self-employed workers who pay national insurance through self-assessment will keep more of the salary that they pay themselves.
How will stamp duty change?
The mini budget announcement confirmed a permanent cut to stamp duty which will see no tax paid on properties valued up to £250,000 in England and Northern Ireland. This change raises the threshold from £125,000, which previously meant buyers were required to pay 2% of the value of their property up to £250,000.
Now, buyers will only pay 5% of the value of the home for any fee above £250,000. For property valued between £925,001 and £1.5 million, buyers will continue to pay 10% tax, while any property valued over £1.5 million will be subject to tax rates of 12%.
Meanwhile, the threshold for first time buyers has been increased from £300,000 to £425,000 in a move that is intended to boost home ownership. In addition, the maximum value of properties that permit first-time buyers’ relief has risen from £500,000 to £625,000.
Off-payroll IR35 reforms
Initially introduced in 1999, the Intermediaries Legislation (IR35) was designed to prevent tax avoidance via the use of personal services companies. Operating via a private company rather than as a contractor enabled individuals to pay lower income tax and no national insurance, and the IR35 aimed to tackle this.
While it was initially down to an individual to assess whether they fell under IR35, reforms in the public sector in 2017 and the private sector in 2021 shifted the responsibility of a contractor’s worker status to the organisation engaging their services. However, part of the mini-budget announcement detailed a repeal of these reforms.
From 6 April 2023, the rules are being ‘simplified’ in a move that the government believes will remove “unnecessary complexity and cost” for businesses. This simplification will see the return of contractors handling the responsibility of their employment status, as well as ensuring they are paying the appropriate tax and national insurance contributions.
Whatever impact the mini-budget announcement has had on your income, you can rely on us to offer you expert advice on securing a mortgage as an independent professional based on your circumstances. Get in touch today to speak to one of our specialist advisers.