Mini-Budget is a massive shake up of the UK’s finances
The UK Chancellor, Kwasi Kwarteng, outlined a series of tax cuts, stamp duty reductions and fiscal measures in a bid to boost economic growth. In an unprecedented move, these measures come as the Chancellor rejected the release of the Office for Budget Responsibility forecast.
Reductions in income tax and National Insurance to come
The Government has brought forward the planned reduction to the basic rate of income tax from 20% to 19% from 2023, and scrapped the 45% top rate of income tax. The Government will also repeal the new 1.25% health and social care levy for many workers as of 6 November.
Corporation tax rises scrapped and low-tax investment zones created
The Chancellor has scrapped the planned increase in corporation tax from 19% to 25%, which was due to come into effect as of April 2023. Also announced are plans for low-tax investment zones, meaning those who live and work in these areas would see personal contributions cut, with tax burdens also lightened for firms. However, the locations and extent of this relief is yet to be confirmed.
Performance fees stripped from defined contribution (DC) charge cap to spur investment
For DC pension schemes the charge cap preventing DC schemes from applying annual charges of more than 0.75% p.a. currently limits investment strategies from using funds with a performance-related fee because it could exceed the cap if performance is strong. Today the Government announced that performance fees will be removed from the charge cap applied to DC pension schemes, in a bid to encourage pension schemes to make investments in infrastructure and high growth sectors such as science and technology.
Overall
The changes herald a move to stimulate and rely on economic growth to support increased Government borrowing. It’s a bold step from a newly formed cabinet who are looking to make their mark ahead of the next general election.