Mini-budget 2022: Income tax to be cut for millions from April – what it means for you
Chancellor Kwasi Kwarteng has announced big tax cuts for individuals and businesses, including a major shake-up to income tax and a permanent stamp duty cut. The changes come as part of today's mini-budget – we round up the new measures and what they mean for you below.
Update 17 October 2022: Most of the measures set out by former Chancellor Kwasi Kwarteng in September's mini-budget (detailed below) will no longer take place, new Chancellor Jeremy Hunt has confirmed today. The exceptions are cuts to National Insurance and stamp duty, which will remain.
In addition, the energy price guarantee will now only cover all households for six months (until April 2023), instead of the two years previously announced, while the Government works on alternative support from spring 2023. See our Emergency fiscal budget MSE News story for more info.
Watch: Martin Lewis' summary of the key announcements
See the video below from MoneySavingExpert.com founder Martin Lewis, who rounds up the key personal finance announcements from the mini-budget.
Income tax: basic rate to be cut by one percentage point and top 45% rate scrapped
From next April, the basic rate of income tax will be cut from 20% to 19%. This will mean 31 million people will be better off by an average of £170 per year, according to the Treasury. Use our updated Income tax calculator to check the impact on your take-home pay.
At the same time, the 45% top rate of tax, which currently applies on earnings above £150,000, will be scrapped entirely – so high earners will instead pay the 40% tax rate on those earnings.
This also means that those who would have otherwise been top-rate taxpayers will start to benefit from a personal savings allowance of £500 – meaning they'll be able to earn up to that amount in savings interest without it being taxed. Top-rate tax payers don't currently have any personal savings allowance.
These changes apply to the rates for non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland. Scotland has a slightly different income tax system. Deputy First Minister John Swinney said the Scottish Government would set out its plans for income tax "as part of the normal budget process".
Stamp duty cut permanently from today
From today, you won't pay any stamp duty on the first £250,000 of a property (doubled from £125,000). The Treasury says this means 200,000 more people every year will be able to buy a home without paying any stamp duty at all.
And first-time buyers will now pay no stamp duty up to £425,000 (up from £300,000). The Government has also increased the value of the property on which first-time buyers can claim relief, from £500,000 to £625,000. See our Stamp duty rate changes MSE News story for full info, or use our Stamp duty calculator to see how much tax you'll have to pay after the changes.
Other key announcements from the mini-budget
As well as the two major announcements detailed above, a number of other measures were also confirmed, including the following:
- National insurance rates will be cut from November. The 1.25 percentage point rise in national insurance contributions (NICs), which took effect earlier this year, will be reversed on 6 November 2022. The change, which was announced yesterday, will benefit almost 28 million working people. See our full National insurance rise reversed MSE News story for more info.
- Universal credit rules are changing for those on low incomes. From next year, more than 100,000 people claiming universal credit will be asked to "take active steps" to increase the hours they work or find better paid jobs – or face having their benefits reduced. See our Universal credit rule changes MSE News story for full info.
- Off-payroll working reforms will be repealed. The 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023. From this date, workers across the UK providing their services via an intermediary, such as a personal service company, will once again be responsible for determining their employment status and paying the appropriate amount of tax and national insurance contributions.
The Chancellor also announced a suite of tax cuts for business, including cancelling the planned rise in corporation tax, freezing alcohol duty for another year and extending the tax relief for investments in plants and machinery.