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Last week's mini-budget, billed as the “Growth Plan”, contains tax cuts and deregulation, aimed at unlocking private sector investment, cutting red tape, reducing taxes and creating jobs. The stated aim is to get the UK to a 2.5% trend rate of growth and end two decades of lacklustre economic performance.

Among the most eye-catching measures: the bankers’ bonus cap is scrapped, as is the planned corporation tax rise. Gone, too, is the higher rate of income tax, which currently sees the richest pay 45% on earnings above £150k. Kwasi Kwarteng, the new chancellor, acknowledged in his speech that many such moves might not be popular, but that the government was prepared to take “difficult decisions” in the single-minded pursuit of its agenda.

The public finances are another area where Kwarteng has made significant changes. Alongside the supply side reforms, he signalled a vast increase in public borrowing: support for households and businesses struggling with energy bills will cost £60bn in the next six months alone and the government has significantly increased its debt forecast. The price of sterling has fallen sharply as markets absorbed the scale of the tax cuts and increase in borrowing.

Unlike a conventional budget, however, the Growth Plan is not accompanied by an economic and fiscal forecast from the independent Office for Budgetary Responsibility. The chancellor said the assessment will be provided before the end of 2022, with another to follow in the new year.

Elsewhere there are multiple giveaways for workers and families, including reforms to stamp duty, cuts to income tax and NICS, and the abolition of the health and social care levy.

The test of this mini-budget will be whether its low tax, low regulation platform can actually deliver improvements to real incomes quickly and, perhaps even more importantly, fix the public realm. There was indeed a touch of expectations management about the long-run benefits in the chancellor’s speech: “None of this is going to happen overnight,” he said.

What’s interesting about the Growth Plan is what’s not in it. Sweeping reforms to planning restrictions, aimed at rapidly increasing the supply of housing and infrastructure, were trailed for the coming months, but with no detail at this stage.


Financial services

  • Bankers’ bonus cap - The cap has been scrapped
  • Big Bang 2.0 – The chancellor said that an “ambitious” package of regulatory reforms will be set out later in the autumn to shake up financial services and drive innovation. This will include the plan for repealing EU financial services law and replacing it with rules tailor made for the UK, and scrapping the Solvency II insurance regulations
  • Venture Capital Trusts and the Enterprise Investment Scheme – Both will be extended beyond 2025
  • Seed Enterprise Investment Scheme – From April 2023, companies will be able to raise up to £250,000 of SEIS investment, a two-thirds increase. To enable more companies to use SEIS, the gross asset limit will be increased to £350,000 and the age limit from two to three years. To support these increases, the annual investor limit will be doubled to £200,000
  • Incentivising pension scheme investment in science and tech – Draft regulations will be brought forward to reform the pensions regulatory charge cap. The government says this move will give DC pension schemes greater clarity and flexibility to invest in UK science and technology firms, helping to grow the sector. There will also be financial support for new pension funds that invest in science and technology businesses
  • Company Share Option Plan – From April 2023, qualifying companies will be able to issue up to £60,000 of CSOP options to employees, double the current £30,000 limit. The ‘worth having’ restriction on share classes within CSOP will be eased, better aligning the scheme rules with the rules in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies


Business tax

  • Corporation tax – The planned rise to 25% that was due in 2023 is cancelled, keeping the rate at 19%
  • Bank Corporation Tax Surcharge – The scheduled change to the rate of the BCTS will be cancelled, keeping the combined rate of tax on profits paid by banks and building societies at 27%. The increase in the Surcharge allowance to £100 million will go ahead as planned
  • Annual Investment Allowance – The temporary £1m level of the AIA, a tax relief on qualifying investments in plant and machinery for businesses, will be made permanent. It was previously due to expire in March 2023
  • Off-payroll working rules (IR35) – The 2017 and 2021 reforms to IR35 will be repealed from 6 April 2023 so that workers providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICS, removing this burden from employers
  • Office of Tax Simplification to be abolished – The chancellor will instead work to embed tax simplification as a priority in decision making throughout Whitehall
  • VAT for overseas shoppers – VAT-free shopping will be introduced for overseas visitors with the aim of boosting the sector and helping high streets
  • Cancelling the increase in rate of Diverted Profits Tax – This was legislated to increase from 25% to 31% from April 2023, but will now be retained at 25% to keep the current 6 percentage point differential with the main Corporation Tax rate


Help on energy costs for households and businesses

  • Businesses – Energy bill relief scheme will reduce wholesale gas prices for all UK businesses, and public sector
  • Families – Energy price guarantee will cap - 2,500 for typical household
  • Estimated cost – The cost of today's energy plans is uncertain because of volatile prices, but the estimated cost given by the chancellor for the next six months is £60bn. It is claimed the plan will reduce peak inflation by 5 percentage points


Personal tax/cost of living

  • Top rate of income tax – The top rate of income tax, levied at 45% on earnings over £150k, will be abolished
  • Basic rate of income tax – The government will bring forward the 1 percentage point cut to the basic rate of income tax to April 2023, 12 months earlier than planned, saving people an average £170 in 2023-2024
  • Health and social care levy cancelled – This was due to come in in 2023
  • National Insurance Contributions – NICs rates will be reduced by 1.25 percentage points from November 2022
  • Dividend tax rates – The government will reverse the 1.25 percentage point increase in dividend tax rates from April 2023
  • Stamp duty – The SDLT allowance will be doubled to £250k from 23 September. From the same date, the relief threshold for first time buyers will increase from £300k to £425k and the maximum value of a property on which first-time buyers' relief can be claimed will increase from £500k to £625k
  • Alcohol duties – Planned increases in the duty rates for beer, for cider, for wine and for spirits will all be cancelled. The government has also published the results of a long-term alcohol duty review


Transport, infrastructure, investment and levelling up

  • Investment Zones – The government will work with the devolved administrations and local partners to introduce “Investment Zones” across the UK. These aim to “drive growth and unlock housing” through tax incentives (including 100% business rates relief for certain premises), planning liberalisation and wider support for the local economy. Plans will be brought forward soon and the government has published a separate paper with the detail
  • Reforms to infrastructure planning and approval – New legislation will be brought forward in the coming months to speed up infrastructure delivery. This will involve cutting red tape in areas such as environmental assessments, consultation processes, habitats and species regulations
  • Housebuilding – A plan will be brought forward in the coming months to “accelerate housing delivery”. The chancellor also signalled his intention to dispose of surplus public sector land for housebuilding
  • Strike busting – Plans will be brought forward to ensure minimum service levels are met during industrial action and the government will tighten rules to require unions to put pay offers to a member vote, ensuring strikes can only be called once negotiations have “genuinely broken down”
  • Net Zero – The government has asked Chris Skidmore MP, a former minister, to chair an independent review, reporting by the end of 2022, into how to deliver the UK’s net zero commitment while maximising economic growth and investment, supporting energy security and minimising the costs borne by businesses and consumers


Prepared by H&K Strategies on behalf of NFP.