New Chancellor's "mini-budget" focuses on growth and lower taxes
£45 billion of tax cuts, the most significant in 50 years.
23 September 2022 • 4 minute read

Key announcements from Chancellor's fiscal statement:
- Planned rise on corporation tax from 19% to 25% to be scrapped.
- The government is discussing setting up investment zones with 38 local areas in England.
- IR35 reforms are to be scrapped in April 2023.
- Reversal of the rise in National Insurance (NI) contributions.
- Cut to basic rate income tax to 19% from April 2023.
- Scrapping of highest rate income tax of 45%.
Today's announcement by the new Chancellor of the Exchequer, Kwasi Kwarteng was officially called a 'fiscal event' by the government and dubbed a 'mini-budget' by the media. In reality, it proved more significant than either of those monikers.
The government is taking a 'full-throated' approach to turbocharge growth to reach a 2.5% annual trend. It intends to expand the economy's supply side through lower taxes. The Chancellor's announcement today amounts to a total cut in taxes of £45 billion, equivalent to 2% of GDP, which is the biggest tax cut event since 1972. Overall, the announcement aims to create a more competitive economy for businesses and entrepreneurs, develop investment opportunities and bring more people into the workforce.
Business taxes and allowances
The Chancellor has cancelled the increase in corporation tax slated for next April. Corporation tax was due to rise from 19% to 25% on profits over £250,000 in 2023. The Chancellor hopes businesses will reinvest these savings, create jobs, raise wages or pay dividends.
It could result in more people into the labour market, which may help small businesses generally, but whether that translates into the skills required by tech startups remains to be seen.
The plan to reduce the limit of Annual Investment Allowance (AIA) to £200,000 has been shelved and will remain at £1 million.
Meanwhile, new and startup businesses are able to raise up to £250,000 under a scheme giving tax relief to investors. And share options for employees can be doubled from £30,000 to £60,000; an incentive when wages in the near term might be muted.
New Investment zones
The government is discussing establishing investment zones with 38 local areas in England. Businesses in designated sites will benefit from time-related tax benefits. There will also be designated development sites to release more land for housing and commercial development to support accelerated development.
Investment Zones are designed to encourage investment and economic activity. Businesses in designated areas in investment zones will benefit from 100% business rates relief on newly occupied and expanded premises. They will also receive full stamp duty relief on land bought for commercial or residential development and a zero rate for Employer NI contributions on new employees earning up to £50,270 a year on those sites.
IR35 reform
The reforms of IR35, the rules that determine contract workers that came into force in 2021, will be scrapped, reducing business complexity. The changes will mean contract workers will return to taking responsibility for their employment status and paying appropriate taxes and NI contributions. It is hoped this frees time and money for businesses that engage contractors and flexible workers.
Income tax
There were also big announcements around personal taxes aimed at leaving more cash in consumers' pockets to help drive spending as recessionary forces grow. There will be a 1p cut to the basic rate of income tax to 19% from April 2023, while there will be a single high rate of 40% with the highest rate of 45% being scrapped.
Meanwhile, the proposed 1.25% increase in NI contributions has been withdrawn, with the return to the previous rate coming into effect from 6 November.
Energy Bill Relief Scheme
Earlier in September, the government announced its energy support package for businesses. The Energy Bill Relief Scheme will see the maximum cost that energy suppliers can pass to businesses capped at £211 per Megawatt Hour for electricity and £75 for gas. This will apply to those on fixed contracts if businesses rates are fixed at a level higher than the government-supported price, and those on variable and all other contracts.
The initial business support package is set to last for six months, coming into effect from 1 October and applying to all energy contracts signed with suppliers since 1 April. A review will be published on the scheme in three months's time to inform decisions on future support after March 2023.
The government anticipates that these measures and those applied to consumers energy bills will reduce peak inflation by 5%.
The information contained in this article is correct at the time of publishing. We recommend that you carry out your own independent research before you make any decisions that will impact your business.
Barclays (including its employees, Directors and agents) accepts no responsibility and shall have no liability in contract, tort or otherwise to any person in connection with this content or the use of or reliance on any information or data set out in this content unless it expressly agrees otherwise in writing. It does not constitute an offer to sell or buy any security, investment, financial product or service and does not constitute investment, professional, legal or tax advice, or a recommendation with respect to any securities or financial instruments.
The information, statements and opinions contained on this page are of a general nature only and do not take into account your individual circumstances including any laws, policies, procedures or practices you, or your employer or businesses may have or be subject to. Although the statements of fact on this page have been obtained from and are based upon sources that Barclays believes to be reliable, Barclays does not guarantee their accuracy or completeness.
Topic
Related tags