Mini Budget 2022: How Will it and the Reversals Affect You?
The mini-budget 2022 turned out to be anything but small, and some policy reversals have since occured. Stamp duty cuts and National Insurance are now some of the last policies standing.
On 23 September 2022, the then Chancellor Kwasi Kwarteng delivered a so-called mini-budget which included some big announcements. Over the subsequent weeks, uncertainty in the financial markets and doubts over how the changes would be funded saw some of the measures rowed back and Mr Kwarteng replaced by Jeremy Hunt.
Here’s a look at what was originally promised, and the reversals that subsequently followed.
How will the mini-budget affect my personal finances?
The main mini-budget policies that remain in place include:
Under Kwasi Kwarteng’s original mini-budget plans, it was announced that the 1.25% rise in National Insurance introduced in April would be reversed, and that still remains the case. It is a move that is estimated will leave around 28 million people £330 a year better off.
National Insurance rates will return to their previous levels from 6 November this year, with basic-rate taxpayers typically gaining £75 in the 2022/23 tax year, and £175 in 2023/24. Higher-rate taxpayers will be, on average, £300 better off this tax year and £700 next year, while additional-rate taxpayers will gain around £1,650 in 2022/23 and £3,890 in 2023/24.
Around 920,000 businesses are expected to save around £9,600 in average contributions annually too.
The stamp duty threshold for buying a property in England and Northern Ireland was raised from £125,000 to £250,000 with immediate effect on the day of the mini-budget and this measure has been retained. The move is expected to mean that around 200,000 more people will be able to buy a home each year without needing to pay any stamp duty at all.
At the same time, the threshold for first-time buyers was raised, meaning there is no stamp duty to pay if you pay less than £425,000 to get on the property ladder. Previously, the threshold was £300,000.
The value of the property on which first-time buyer stamp duty relief can be claimed has also increased, from £500,000 to £625,000.
As part of the original announcement, around 120,000 people who claim Universal Credit and earn less than the equivalent of 15 hours a week at National Living Wage were told they must “take active steps to increase their earnings or face having their benefits reduced”.
At the same time, it was revealed jobseekers over the age of 50 would be allowed additional time with jobcentre work coaches to aid their efforts to find work.
Both of these measures remain intact.
The mini-budget policies that have been scrapped
Some of the original mini-budget policies that have since fallen by the wayside include:
The original mini-budget announcement by the then Chancellor Kwarteng included a pledge that the 45% additional rate of income tax paid by those earning over £150,000 would be scrapped.
However, it was confirmed on 3 October 2022 that its removal would not go ahead and that the 45% rate will be retained, as before.
And under Mr Kwarteng’s original plans, a reduction in the basic rate of income tax to 19% from its current level of 20% that was planned for April 2024 was going to be brought forward to April next year.
According to the government, the move would have seen some 31 million taxpayers in England, Wales and Northern Ireland pay on average £170 less a year in tax. The move did not affect taxpayers in Scotland, where income tax rates are different and set by the Scottish government.
However, on 17 October 2022, the new Chancellor, Jeremy Hunt, said this now would not happen, with any cut being put on hold “indefinitely”.
The income tax changes would have been positive news for savers whose nest eggs are outside a cash ISA and earn more in interest than the personal savings allowance. That’s because income tax is payable on this excess interest, and the reductions would have meant they pay less tax. However, this now no longer applies.
» MORE: ISA or savings account – which do I need?
The changes to income tax would also have meant retirees taking an income from annuities and pension drawdown could expect to see a reduction in the amount they pay in tax from April next year. But this now won’t happen.
On a more positive note, the income tax amendment had been expected to see incentives for pension savers take a slight hit. However, with the change now off the cards for the time-being, the pension tax relief that is on offer when paying into a pension should remain unchanged.
While the announcements had been made previously, Mr Kwarteng had taken the opportunity presented by the mini-budget to reiterate how the government intends to help households and businesses tackle energy price rises.
But while the energy price guarantee scheme remains in place, and should help typical households save on their gas and electricity bills, it will now only be in place until April next year rather than for the next two years, as was originally promised.
How will the mini-budget affect my business?
Similar to consumers, businesses should also still benefit from reduced National Insurance costs and help with energy bills, although the latter is now also due to end in April next year.
A permanent increase in the annual investment allowance – which allows full tax relief for expenditure on qualifying plant and machinery – to £1 million is also continuing. And so too is support for new and start up companies in the form of a rise in the amount of funds available through the Seed Enterprise Investment Scheme (SEIS) to £250,000. The age and gross asset limits for companies to be eligible for the scheme are also still being increased.
The introduction of so-called investment zones in 38 areas in England, where businesses could benefit from targeted tax cuts and more generous planning rules, also looks set to continue.
However, some of the other announcements made by Mr Kwarteng affecting businesses have since changed.
In the original mini-budget announcement, businesses were told that next year’s planned rise in Corporation Tax to 25% was being cancelled, meaning the rate would remain at 19%. However, in a subsequent announcement on 14 October 2022, it was confirmed the rise will now go ahead as planned, meaning Corporation Tax will increase to 25% from April 2023.
And plans to further reconsider the rules surrounding off-payroll working – more widely referred to as IR35 – have also been shelved.
» MORE: Small and start up business grants
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Tim draws on 20 years’ experience at Moneyfacts, Virgin Money and Future to pen articles that always put consumers’ interests first. He has particular expertise in mortgages, pensions and savings. Read more