Chapters Financial News

Shortly after our new Prime Minister took office, the new leaders of our government, and our new Chancellor, Kwasi Kwarteng MP, announced plans to make significant changes to the nation's finances, and what was termed a 'mini budget' was released on the morning of 23 September 2022. As you will see from the notes below, it was anything but 'mini', and we have noted some of the key changes for your reference and records. If any of the changes affect your position, then please do arrange a review.

Notes of changes from the mini budget

• The basic rate of income tax will be cut to 19% from 20% in April 2023, one year earlier than originally planned. Basic rate income tax applies to income above the personal allowance of £12,570 gross pa and below the higher rate tax threshold noted above.
• The additional rate of income tax will be abolished from April 2023. The current rate of 45% that applies to income above £150,000 gross pa will be scrapped, with the higher rate of 40% applying to income above £50,270 gross pa.
• The planned rise of corporation tax from 19% to 25% in 2023 has been scrapped.
• There will now be no stamp duty to pay on the first £250,000 of a property's value, a doubling of the current £125,000. In addition, first time buyers currently pay no stamp duty on the first £300,000 of a property's value, and this will increase to £425,000. The value of a property on which first time buyers can claim relief will increase from £500,000 to £650,000. These changes are permanent and effective immediately.
• The annual investment allowance for businesses investing in plant and machinery was planned to drop from the temporary level of £1M back down to £200,000 in 2023. This drop has been cancelled and businesses will continue to benefit from 100% tax relief for qualifying expenditure between £200,000 and £1M.
• Repeal of the complex changes to off-payroll (IR35) working from April 2023. From that point, workers providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and National Insurance contributions.
• The cap on bankers' bonuses has been lifted. The Chancellor noted that the cap simply pushed up basic salaries and drove activity out of the UK, rather than capping total remuneration.
• New 'Investment Zones' with lower taxes and more liberal planning frameworks to encourage housing development and business investment

We should also note that the 1.25% rise in National Insurance implemented in April 2022 and due to run until April 2023 is to be reversed from 06 November 2022. The subsequent Health and Social Care Levy, which was due to come into force in April 2023 as a separate new tax of 1.25%, will also be cancelled. This is also the case for tax on dividend income from April 2023.

Economic conditions

It is important to place these changes in context against the backdrop of other economic changes being experienced both in the UK and across the economies of the world. We have lived in a low-inflation, low interest rate environment for over a decade and current trends indicate a shift from this looking forward. Inflation is now running around double-digits and is likely to rise further, although now tamed in part by the new energy cost cap being introduced by the government. We have also seen the Bank of England raise base rates to 2.25%, with further rises to be expected. Good news for savers, and invariably bad news for borrowers. Many investment markets have also seen significant volatility over 2022, and we do expect this to continue.

Review

If you would like to review your existing arrangements or changes in your circumstances with the team at Chapters Financial then please let us know and we can achieve this face-to-face in the office in Guildford, or of course we can offer a virtual meeting or telephone call to suit. This might include a change in your attitude to investment risk or a need for additional income, as examples.

Summary

The changes announced by the government are designed to help boost economic growth. It will be interesting to see the full effects of these measures, noting that some will take time to filter through and have a real effect on personal bank balances.

We look forward to continuing to help over the coming period, and as our business reaches age 18 in early October 2022, we thank you for your continued support.

No individual advice is provided during the course of this blog.

Keith Churchouse FPFS
Director
CFP Chartered FCSI
Chartered Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.