Chancellor’s Mini-Budget

by | Sep 26, 2022

Chancellor’s ‘Mini Budget’ Announcement – 26/09/2022

On Friday 23rd Sept, we heard from the new Chancellor with what was described as a mini budget, but the announcements made were far from mini! In this blog we’ll update you on the changes and try to expand on what it means for clients of Smarter Accounting.

As we all know recent months have been full of bad news and the winter ahead looks challenging.  Cost of living increases have been massive. Inflation is currently at 9.9% but forecasts predict further increases. Energy prices are a big part of the issue and even with Government intervention we will all see large increases from October. The Bank of England increased the base rate to 2.25% last week and further increases still seem likely.

The squeeze on business and personal finances has been great and the Chancellor had a huge task on his hands. Here’s what he announced:

  • Income Tax
    • Basic Rate Income Tax cut to 19% from April 2023
    • 45% Higher Tax Rate (Earnings over £150,000) abolished from April 2023 – This means that there will only be one rate of higher rate tax of 40% from 2023. This was a real surprise in the announcement and although popular with those due to gain, for the majority this feels very unfair
  • National Insurance
    • The 1.25% rise in National Insurance will be reversed from 6 November 2022 – November pay packets should show this change. This will be for employee and employer contributions
    • Dividend tax rates will also fall by 1.25% but not until April 2023 i.e., reversing the previous increase
  • Corporation Tax
    • Corporation Tax Rates were due to increase in April 2023, up to potentially 25% for some. This increase will now not take place and Corporation Tax will remain at 19%
  • Benefits
    • Universal Credit rules will be tightened and benefits reduced if people are earning less than the equivalent of 15 hours a week from January (currently it is 9 hours and was due to increase to 12 from 26 September)
    • It is estimated that this will affect about 120,000 more people
    • Claimants will be set ‘clear work expectations’, including applying for jobs, attending interviews, or increasing work hours
    • Certain groups remain exempt, including those who can’t work because of long-term sickness or disability
  • Work and Investment
    • IR35 Rules will be simplified – This has been controversial for decades and something which HMRC, the Government and the House of Lords have been wrestling with. In 2017 and 2021 the rules were changed so that the organisations engaging contractors were responsible for determining the contractor’s employment status and paying the correct amount of Tax and National Insurance. From 6 April 2023 contractors again will be responsible for determining their own status. This does not mean that IR35 has gone away but does mean that truly self-employed contractors can exercise control over their position. HMRC has a tool to help contractors determine whether they are self-employed, which can be found here >
  • Annual Investment Allowance (Capital Allowances on purchases of Plant & Equipment Fixed Assets) will remain at £1m indefinitely
  • Share options for employees doubled from £30,000 to £60,000
  • Stamp Duty
    • No stamp duty on first £250,000 (first time buyers £425,000)
    • Rates and Allowances are unchanged for 2022/23
  • Bankers’ Bonuses
    • Rules limiting bankers’ bonuses to be scrapped
  • Shopping
    • Planned increases to duties on beer, cider, wine, and spirits cancelled

The mini budget was significant. With the Bank of England saying we are already in recession, this budget, and pledges to cut taxes further in the new year is the new Chancellor’s way of stopping the economic decline. Will it work? That remains to be seen. From a monetary control perspective, it does seem at odds with the Bank of England’s policy to increase interest rates to quell demand.

Other Measures – Energy Prices

We had already heard the Government’s plans regards energy prices for households. From October 2022 and for 2 years after the Government will offer an energy price guarantee. This will limit prices for the standard household to £2,500 per annum. The standard household costs are based on an average household usage of energy. Therefore this doesn’t mean that you will only pay a maximum of £2,500; if you use more energy your total bill will increase accordingly. Under Ofgem’s price cap the average household energy bill would have increased to £3,550 from October. Therefore, this cap represents significant protection. However, it still also represents a significant price increase on prices paid prior to October:

  • The price cap was £1,277 until April 2022
  • From April 2022 this increased to £1,971 (54.35% increase)
  • From October 2022 protected price cap is £2,500 (Further 26.84% increase and 95.78% increase from the pre-April 2022 figure

Business Customers have seen massive increases in energy prices too and have not been protected by Ofgem. We know that many of our customers are worried about this. The Government have provided some support but limited to a 6-month period. The scheme details are:

  • Prices capped for 6 months from 1 October
  • Prices will be fixed at 21.1p per kilowatt hour (kWh) for electricity and 7.5p per kWh for gas
  • This is less than half of the expected wholesale prices this winter, but again may be significantly more than you are currently paying
  • Organisations on a fixed price contract will be eligible for the scheme if the deal started after 1 April 2022
  • The savings will start to appear in November’s bills but back dated to October
  • Will be subject to a review in 3 months’ time to identify ‘vulnerable’ organisations that will need further support after March 2023

The scheme will apply to all non-domestic energy customers, including charities, schools, etc.

CHSW Charity Ball

On Friday of last week, Smarter Accounting co-hosted a charity ball with, under the banner of Smarter Events. It took place at Teignmouth Golf Club and was attended by over 100 people. The event was in aid of SW Children’s Hospice and was a great success. Attendees had a great time and although figures are still being finalised, we know have raised several thousand pounds for the charity. We will bring you more news on this when we have finalised the total.

Smarter Recruitment

We are currently recruiting to both offices. We are particularly looking for Accounting Technicians with practice experience. If you know anyone who may be interested, then please ask them to contact David in Teignmouth or Mark in Crediton.

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Best wishes and stay safe