New Chancellor in the House.
Key points for individuals from today’s announcements are:
- the removal of this July’s national insurance rise. That comes in November, which will be a significant challenge for payroll departments to put in place in only six weeks. Taxpayers who receive income taxed at source under Pay As You Earn should keep a careful eye on payslips received from the second week of November onwards, from which point take-home pay should very slightly increase, back to what it was during May and June 2022.
- from April 2023, a 1% drop in the basic rate of income tax to 19%. This will match the corporation tax rate which will remain at 19%: whatever anyone’s view of the rate, there are benefits to these being aligned for individuals and companies.
- the top rate of income tax, 45%, will cease from next April.
The direction is very clearly towards lower, not higher, tax. In the absence of any hint of a ‘wealth tax’, this will be funded by public borrowing – all the more so if the Chancellor’s attempt to assist businesses does not pull the economy promptly out off the current recessionary droop.
Today’s announcement was explicitly not a Budget. It has been referred to as a ‘fiscal event’. Also a ‘mini budget’ – inappropriate given the significant changes. The more serious aspect of how this has been branded is that as a non-Budget, the changes announced are not subject to the same level of Parliamentary scrutiny which is part of the usual Budget cycle.
A real Budget will follow later this financial year. It will be interesting to consider what further will be announced then. Today’s tax drops are a high-risk strategy, so an actual later Budget will be an opportunity to rebalance, perhaps having observed which areas from today cause the most push back. The major tax break promised to those with the highest incomes will not escape the public’s notice during hard times.