The Growth Plan 2022
The Growth Plan statement was delivered on Friday 23 September 2022.
Here’s our summary of the proposed changes with links to the Growth Plan documents if you would like more detail.
For the majority of working people, the news is fairly straightforward in that energy prices will be capped over the winter, albeit at a much higher level than last winter, tax on income will start reducing from November, and the cost of moving house may be cheaper.
The more complex issues to work through will be those that are specifically designed to stimulate growth in the economy. One of those was the announcement that changes would be brought forward to encourage increased investment of pension funds in illiquid assets.
While on the face of it the changes proposed sound progressive, it is only a small step on this journey and there are many complex issues to work through before we might see the material investments that the Government is looking for.
The Chancellor has brought forward the 1% reduction in income tax to 6 April 2023. The basic rate of income tax will reduce to 19% from April 2023. Also, from 6 April 2023 there will be a single higher rate of income tax, rather than an additional 45% on annual income above £150,000.
Update 3 October 2022 – the Chancellor has confirmed the additional income tax rate of 45% will not be removed as previously announce.
Update 17 October 2022 – The new chancellor Jeremy Hunt has confirmed the rate will remain indefinitely at 20p until economic circumstances allow it to be cut.
These changes won’t automatically apply to Scottish tax-payers, this decision will be made by the Scottish Government.
The Government has confirmed the change to basic rate tax will not affect relief at source pension tax relief until 6 April 2024 to give businesses time to update their systems.
As announced yesterday (22 September 2022), the Chancellor is reversing the 1.25% increase in National Insurance contributions that came into force from 6 April 2022. This reduction will apply from 6 November 2022 for both employees and employers and means:
- Class 1A and 1B employers will pay 13.8%, down from 15.05% on earnings over £9,100.
- Class 1 employees will pay 12%, down from 13.25%, on their earnings between the primary threshold and the upper earnings limit; between £12,570 and £50,270.
- Class 1 employees will pay 2%, down from 3.25%, on their earnings above the National Insurance contributions upper earnings limit.
In July 2022 the Government increased the primary threshold for employees from £9,880 to £12,570. The Chancellor is not making any changes to this.
These changes will affect existing salary sacrifice arrangements. Any existing arrangements should be reviewed to ensure they remain appropriate.
From 6 April 2023 the Health and Social Care Levy was due to come into force. The Chancellor also announced this will no longer happen, and a Bill has been introduced to remove it.
The Chancellor confirmed the proposed increase to 25%, planned for 1 April 2023, will no longer take place. Corporation tax rate will remain at 19% for all firms, regardless of the amount of profit made.
Update 14 October 2022 – the Prime Minister has confirmed the 25% increase in Corporation tax will take place on 1 April 2023.
Stamp Duty Land Tax
To help boost the housing market, the stamp duty bands have changed for individuals buying property in England and Northern Ireland. This change is effective from 23 September 2022.
|Standard residential rate
|£0 to £250,000
|£250,000 to £925,000
|£925,000 to £1,500,000
There are other rates for purchases of additional properties.
First time buyers
The amount a first-time buyer can spend on a house without paying stamp duty has been increased. First-time buyers will not pay any stamp duty if their first home costs less than £425,000 an increase of £125,000.
If a first-time buyer does spend more than £425,000 they will now be entitled to relief meaning they will pay stamp duty of 5% up to £625,000.
These changes are effective from 23 September 2022.
Pension charge cap
In the Autumn 2021 Budget statement, the Government announced it will consult on further changes to the regulatory charge cap for defined contribution pension schemes. The consultation ran from 30 November 2021, with the response published 30 March 2022.
The Government plans to bring forward draft regulations to remove performance fees from the charge cap. The charge cap currently prevents defined contribution schemes from applying annual charges of more than 0.75 per cent on a member's pot.
In the Growth Plan, the Government said that “bringing forward draft regulations to reform the pensions regulatory charge cap, giving defined contribution pension schemes the clarity and flexibility to invest in the UK’s most innovative businesses and productive assets creating opportunities to deliver higher returns for savers”.
There was no date indicated on when these new regulations will be put into force.
The reforms effective from 2017 and 2021 to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023. From 6 April 2023, workers across the UK providing their services via an intermediary, such as a personal service company, will be responsible for determining their employment status and paying the appropriate amount of tax and National Insurance contributions.
Update 17 October 2022 – The new chancellor Jeremy Hunt has confirmed that this will no longer be repealed.
The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.
All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.