Having announced in advance the abolition of the Health and Social Care levy on Friday 23 September 2022, the new Chancellor set out further tax initiatives designed to stimulate growth in the UK economy.
The Corporate and Business Tax team at Mercer & Hole have summarised below what we know so far about the measures.
Health and Social Care Levy abolished
The 1.25% percentage point increase in National Insurance that came in earlier this year has been abolished with effect from 6 November 2022.
The same increase to dividend rates has also been abolished, but this does not take effect until 6 April 2023.
The Class 1A and 1B National Insurance rates (paid by employers on employees’ expenses and benefits) for 2022/23 have also changed to 14.53%.
Reduction in basic rate of income tax
From 6 April 2023, the basic rate of income tax will fall from 20% to 19%.
However, as heavily publicised, the original proposal to abolish the additional rate of tax for those earning more that £150,000 per annum, will no longer be going ahead (updated since original article was posted.)
Tax incentives in Investment zones
The government is currently in discussion with 38 local authorities in England to establish investment zones that are designed to encourage rapid development and business investment. These zones will be specific geographical areas within counties to help boost growth in areas that most need it including the West Midlands, the Tees Valley and Somerset.
The intention is for these specific investment zones to benefit from the following tax benefits over the initial 10-year period:
- 100% first year enhanced capital allowance relief for plant and machinery
- Enhanced Structures and Buildings Allowance relief of 20% per annum
- Zero rate National Insurance contributions on new employee earnings up to £50,270 per annum
- Full Stamp Duty Land Tax relief on land bought for commercial or residential development
- 100% business rates relief on newly occupied or expanded premises.