Romford-based accountancy firm Clemence Hoar Cummings has said many businesses will be pleased with the Chancellor’s support during the cost-of-living crisis.
However, wider concerns persist about the potential for rocketing inflation, which could harm economic growth and heavily indebted businesses.
Standing to address Parliament, Kwasi Kwarteng said the measures in his fiscal statement were “a new approach for a new era focused on growth”.
What followed was one of the most significant fiscal events in recent years, as the Government announced measures to support individual taxpayers, high-earning business owners and the companies that they run.
The Chancellor confirmed that the Corporation Tax rise planned for April 2023 would be scrapped and that this rate of tax would remain at 19 per cent.
He also announced that the previous 1.25 percentage point increase to National Insurance introduced earlier this year would be reversed and the planned Health and Social Care levy abolished – freeing up cash for many businesses.
The existing £1 million Annual Investment Allowance will also be retained permanently, instead of falling to £200,000 from March 2023 to support additional investment in plant and machinery.
To further support investment the Government announced the creation of up to 40 tax-free investment zones, which will come with a wide range of benefits for those based within them.
David Bransbury, Director at Clemence Hoar Cummings, said: “The measures announced by the Chancellor represent one of the biggest tax cuts in 50 years, with estimates suggesting that £45 billion worth of tax reductions will be on offer to SMEs and their owners, as well as many other taxpayers.
“The scrapping of the Corporation Tax increase, a permanent boost to the Annual Investment Allowance and support with rising costs through a reverse to the National Insurance rise will, the Chancellor hopes, boost the UK’s economic growth rate by 2.5 per cent and increase spending and tax receipts.”
Many individual taxpayers will also benefit from the Chancellor’s announcement through cuts to Income Tax, Stamp Duty Land Tax (SDLT) and for contractors, a repeal of the IR35 rules.
Under a landmark change to Income Tax, the additional rate of tax, paid at 45 per cent on earnings over £150,000 will be removed and a 1p cut to the basic rate of tax on earnings between £12,571 to £50,270 will come into force from April next year.
Many business owners on higher incomes will welcome this change, along with the scrapping of the 1.25 percentage point increase to the Dividend Tax rate.
Meanwhile, those looking to purchase a new home will enjoy increased SDLT thresholds, which will rise from £125,000 to £250,000 on most property purchases, and from £300,000 to £425,000 for first-time buyers.
“Describing these measures as a ‘mini-Budget’ is somewhat misleading given the considerable tax cuts and support offered to taxpayers, SMEs and many larger businesses,” said David.
“This should help with the cost-of-living crisis and will hopefully encourage greater business investment in years to come.”
The Government promised that the Energy Bill Relief Scheme, announced days before, would help to lower inflation by as much as five percentage points in the mid-term by capping energy costs for businesses and individuals.
However, there are concerns among economists and the Bank of England that the tax cuts announced in the Chancellor’s speech will not only drive up national debt through borrowing but also encourage price increases in the wider economy further driving up inflation.
David added: “By choosing to go for growth, rather than maintain a policy of fiscal responsibility the Government is taking a real gamble.
“If interest rates continue to rise due to growing inflation, then the support outlined in the mini-Budget may not amount to as much as hoped.”
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