Page 3 - Growth Plan Newsletter

The main measures

Some of the more expensive measures announced by the Chancellor had been well trailed in Liz Truss’s leadership
campaign, the recent announcements from government departments or the past week’s media coverage. While the era
of Budget purdah has disappeared, Mr Kwarteng did manage to produce some real surprises.
If you or your partner do not fully use the personal allowance, you could be paying more tax than necessary. There are
several ways to make sure you maximise use of your allowances:

Income tax

In his Spring Statement 2022, Mr Sunak’s rabbit-out-the-hat announcement was that basic rate tax would be cut to
19% from April 2024. This was effectively made possible by the Chancellor’s earlier decision to freeze personal
allowances and tax bands through to April 2026. Higher than projected inflation meant that the freeze was generating
much greater revenue than had been anticipated.

Mr Kwarteng went considerably further on the income tax front. The cut in basic rate tax will now take effect from
April 2023 and at the same time the 45% additional rate of tax on income over £150,000 will be abolished.

Neither change will apply to non-dividend non-savings tax in Scotland, which sets its own tax rates.

Special transitional provisions will maintain Gift Aid relief at 20% until April 2027. Similarly, pension tax relief at source
will stay at 20% for 2023/24 before dropping to 19%.

PLANNING POINT

The reduction in both the basic rate and abolition of additional rate means that the timing of income
receipts and the making of tax relievable pension contributions has become more important. For
example, you may wish to defer realisation of an investment until after 5 April 2023 to benefit from
lower tax rates in 2023/24. On the other hand, you may want to make pension contributions in this tax
year if you are currently an additional rate taxpayer.

National Insurance contributions

Rishi Sunak announced an across-the board 1.25 percentage point increase to the rates of National Insurance
Contributions (NICs) in September 2021 as part of Boris Johnson’s social care package. The extra charge was due to
disappear from NICs in 2023/24, to be replaced by a new Health and Social Care Levy at 1.25%, which would be
payable by all earners, not just those under State Pension Age as currently applies to NICs. Before the higher rates
were due to take effect on 6 April 2022, Mr Sunak was forced by backbench pressure to water them down. The
dilution took the form of increasing the starting point at which employees and the self-employed (but not employers)
begin to pay earnings-related NICs from £9,880 a year to £12,570 a year. This change took effect from 6 July 2022,
three months into the new tax year and will remain in being.

The main question with the widely anticipated unwinding of the rate increase was also one of timing. This was
resolved the day before Mr Kwarteng’s statement when the Government published a bill to scrap the Health and
Social Care Levy due in 2023/24 and reinstate lower NIC rates with effect from 6 November 2022. HMRC seem
concerned about the timing, as on Thursday evening it sent employers an email as it wished them to know of the

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