The new measures introduced by the Government include abolishing the higher rate of Income Tax, scrapping bankers’ bonuses, and permanently cutting stamp duty. Other announcements focused on tougher rules for Universal Credit claimants, slashing National Insurance, and cancelling the health and social care levy.
Officials have suggested that the richest could benefit by £10,000 a year each under the new plans, while the announced tax cuts will leave a £45 billion per year ‘black hole’ in public finances by 2026-27, The Mirror reports . Here’s what you need to know about today’s mini-budget announcements.
Income Tax cut by 1p and abolished for highest earners
For the first time in 15 years, the basic rate of Income Tax on earnings over £12,570 will be cut from 20p to 19p in the pound from April 2023. The top rate of Income Tax for the highest earners, which was previously an additional 45% on annual income above £150,000 a year, has also been abolished - there will instead be a single higher rate of Income Tax of 40% from April 2023.
Stamp Duty slashed
The threshold for stamp duty when buying a property has also been changed, effective today. Currently, no stamp duty is paid on the first £125,000 of a purchase, or the first £300,000 for first-time buyers if the property costs less than £500,000.
The new thresholds announced by the Chancellor will see the £125k threshold double to £250k, while the first-time buyer threshold will also rise to £425k, which will now apply to any property up to £625k. Critics of this move have warned that it could lead to a huge rise in house prices.
Cap on bankers’ bonuses scrapped
A cap on bonuses for bankers that was introduced following the 2008 financial crash has now been axed. The old rule stated that bosses were not allowed to award more than twice an employee’s salary in bonuses - but unlimited bonuses will once again be allowed following Kwarteng’s announcement.
The Chancellor said: “All the bonus cap did was push up the basic salaries of bakers or drive activity outside Europe. It never capped total remuneration so let’s not sit here and pretend otherwise. We are going to get rid of it.”
National Insurance cut
National Insurance is to be cut back from November 6, with the tax on earnings over £12,750 dropping from 13.25% down to 12% as it was in April. The Government said that the change will see people pocket an extra £330 each on average in 2023-24 - however, the cuts will benefit higher earners most, with someone on £50,000 getting an extra £468 while a worker on a £20,000 salary will get just £93 a year.
Corporation Tax cut
The Chancellor confirmed that a planned rise in Corporation Tax would be cut. The tax was due to rise from 19% to 25% in April 2023, but this will no longer go ahead - Prime Minister Liz Truss said that the move will help to “get more businesses going in the UK”.
Changes to planning, childcare and immigration
The mini-Budget announced a series of other reviews, after Liz Truss promised to target tax reviews at families and business rates. The PM told reporters this week: “We have to look at all tax rates.”
The Chancellor said: "Over the coming weeks, my Cabinet colleagues will update the House on every aspect of our ambitious agenda. Those updates will cover: the planning system, business regulations, childcare, immigration, agricultural productivity and digital infrastructure."
Crackdown on Universal Credit rules
The Government had already announced changes for Universal Credit claimants, which come into force next week . The Administration Earnings Threshold (AET) will be increased, affecting around 114,000 people who currently receive Universal Credit and how much they will have to look for work.
Currently, Universal Credit claimants are required to carry out a ‘light-touch’ job once they work more than nine hours a week on the national living wage - compared to the ‘intensive work search’ required if they work less than these hours. This threshold will rise to 12 hours from Monday - and the Government plans to raise it again in January to 15 hours a week, affecting another 120,000 people.
‘Investment zones’ where affordable housing rules will be scrapped
Talks have begun with 38 areas across England to set up “investment zones" where there will be ”generous, targeted and time-limited tax cuts for businesses”. The Treasury says this “could encourage investment in new shopping centres, restaurants, apartments and offices”.
Negotiations over how much affordable housing there should be will be axed - with developers instead following “a set percentage” - while height restrictions on buildings will also be abolished. Among these 38 locations involved in talks are North East areas, North of Tyne and Tees Valley, as well as Cumbria and parts of Yorkshire.
Cost of energy bill help confirmed
The cost of the Government’s Energy Price Guarantee, announced by Liz Truss earlier this month which sees the average household energy bill capped at £2,500, was confirmed by the Chancellor as £60 billion for the first six months alone. He said: "The heavy price of inaction would have been far greater than the cost of these schemes”.