High earners will benefit most from today’s mini budget announcement.
Speaking to Business Matters, Paul Haywood-Schiefer, senior director at leading tax and advisory firm Blick Rothenberg, said: “Reversing the recent increase in NIC rates would provide savings for all income earners, with incomes exceeding around £10,000 per year (and assuming similar reductions). in devolved administrations in Scotland and Wales).
“While the reduction provides a welcome relief, the additional borrowing required to finance it, and other measures introduced could cause major headaches for future governments.”
He added: “High income earners will particularly benefit after the additional tax rate has been abolished, from April 2023, which means income over £150,000 will no longer incur an additional 5% tax fee and will instead be charged a 40% tax. . The measure itself affects only 629,000 taxpayers out of a total of 34 million in the UK, but the tax savings for these individuals would be significant. For example, a single return with a salary of £1m will save more than £50,000 in tax and the NIC from April 2023. This compares somewhat with a single return with a salary of £20,000 which will save only £218.
The sudden “bumper” winner here could be corporate directors. Due to a problem with the way NICs are calculated, the manager pays on an “annual” basis rather than a weekly or monthly number. As such, the increase in the NIC rate from November may actually apply retroactively from April for these individuals. Exact details/mechanisms will need to be checked here when more details are published.”
Haywood-Schiefer said: “Savings are slightly lower for the self-employed person, although this will be mitigated by the introduction of a Class 4 NIC with a subsequent amount.
“The constantly struggling bar and pub industry may take some relief from scrapping the planned alcohol fee hike, but with costs on utilities soaring, this is a small help to solve the ever-growing problems in the industry.
“The adjustments to land stamp tax rates (although this has yet to be confirmed in Scotland and Wales) for all individuals provide some welcome relief in the face of rising mortgage interest rates, the winners here being first-time buyers who have experienced A significant increase in both the 0% range of the SDLT to £425,000 combined with an increase in the maximum eligible property value.In addition, plans to lower barriers to land development could provide further assistance in combating the housing crisis, although It is likely to put the government on a collision course with its usual support in the countryside.
Small business owners and entrepreneurs will be relieved to hear that tax incentive investment plans are being strengthened and expanded. They will also benefit from the equivalent reductions in the NIC for their employer, as well as reductions in the dividend rate from April 2023 which will see the reduction of the highest tax rate on dividends from 39.35% to just 32.5%.”
The losers, Haywood Schaefer said, are: “Individuals who have paid land tax in recent months, since the exemptions that were introduced during the shutdown were abolished, would be unfortunate that they have fallen in this period of relatively high tax rates.
In addition, low-income individuals whose income is less than the personal allowance will not receive any additional assistance in this period of high inflation. While all families will receive £400 to help with energy bills, this is the only relief for individuals who are usually the hardest hit by inflation.
“The real losers will be the ones who will have to pay for all these cuts later. No costs have been saved for these measures, but the borrowing will be significant, especially with the help of the energy crisis. These cuts may be short-lived, but they are long-term.”