Mini-Budget 2022: Personal Tax

Alexandra Docherty

Alexandra Docherty

Partner and Head of Private Client Tax

The ‘mini-budget’ saw significant tax cuts being applied to income tax rates, as well as cuts to recent increases to National Insurance Contribution rates (NICs) as follows:

Updated 3 October 2022: The Mini-Budget announced the scrapping of the top 45% rate of income tax as of 6 April 2023, for tax payers resident in England, Wales and Northern Ireland. However, as at 3 October 2022 this has been reversed.

The original announcement on 23 September meant that those earning more than £50,270 In England, Wales and Northern Ireland would pay a top rate of income tax of 40% rather than 45%. However, Chancellor Kwasi Kwarteng announced on 3 October 2022 that the 45% rate will remain in place, and will not be scrapped. 

Updated 17 October 2022: Income Tax cut – reversed

The Mini-Budget announced a basic rate cut for those in England, Wales and Northern Ireland by 1% from 6 April 2023 from 20% to 19%. This has now been scrapped by the new Chancellor, Jeremy Hunt, as announced on Monday 17 October.

Updated 17 October 2022: Dividend rate cut – reversed

The mini-Budget also announced the removal of the dividend additional rate, which would have seen the dividend rate reverting to 32.5% from April 2023, which would benefit those previously with total income in excess of £150,000. This has now been scrapped by the new Chancellor, Jeremy Hunt, as announced on Monday 17 October and the rate will stay at 39.35%.

Reversal of the Health & Social Care Levy, resulting in a cut to NICs going forward from 6 November 2022.

  • This sees NIC rates cut by 1.25% across the board, to include: Class 1 (employee and employer), Class 1A, Class 1B and Class 4 (paid by Self-employed).   
  • This cut in NIC rates will save on average £135 to taxpayers this current tax year (2022/23) and £30 in the next tax year (2023/24).
  • All businesses will benefit where they suffer Class 1 NIC liabilities of greater than £5,000. Eligible businesses (claiming the Employment Allowance) with Class 1 NICs liabilities of less than £5,000 already pay no Class 1 NICs.

Gift Aid - updated 17 October 2022

A four year transition period for Gift Aid relief will apply to assist charities, to maintain the income tax basic rate relief at 20% until April 2027. There will also be one-year transitional period for Relief at Source (RAS) pension schemes to permit them to continue to claim tax relief at 20%. This change is now obsolete given the subsequent u-turns following the mini-Budget.

Find out more

For taxpayers in Scotland wondering how to mitigate the widening tax gap, please don't hesitate to get in touch with myself, a member of our Private Client Tax team, or your usual Johnston Carmichael adviser.

You can read our full 'mini-budget' summary, here.

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