The mini-budget – the new UK government’s plan for growth

The new Chancellor of the Exchequer, Kwasi Kwarteng, spoke for only 25 minutes today but effectively turned the recent history of British tax policy on its head.

Kwarteng says there are three economic priorities for the new government – Reforming the supply side of economy, responsible public finances and cutting taxes to promote growth.

The most obvious measures impacting the housing market and of interest to investors are:

• There will be no stamp duty on the first £250,000 of a property purchase, instead of £125,000.;
• First time buyers will only pay stamp duty on homes over £425,000, up from £300,000;
• First time buyers’ relief is available on properties up to £625,000, up from £500,000;
• Scrapping the 2023 proposed corporation tax rise, so leaving this tax on profits at 19p, the lowest of the G20 economies. This will benefit property investors who own in a corporate structure.

These changes take effect immediately. But, disappointingly, there appears to be no change to the additional property stamp duty surcharges which exist.

Find out how much Stamp Duty you have to pay with our updated Stamp Duty Calculator here.

But possible good news to investors will be:

• Bonus cap for City bankers scrapped, which is likely to increase demand for property in central London;
• The creation of 40 investment zones across England, to be confirmed later, which will have substantial incentives for investors such as low or no stamp duty on commercial and job-generating developments;
• An acceleration in the release of government-owned land to be sold for private development;
• There will be long term reform of the planning system to be outlined in the coming weeks. A new Bill will “unpick planning restrictions” with the aim of streamlining processes.

There has also been a raft of new tax incentives announced to create a much more private sector-friendly economy, with the emphasis on growth. Specific measures include:

• From April 2023 the basic rate of Income Tax will be cut from 20p to 19p. The government will also at that time scrap the higher 45p income tax rate completely “to attract global talent and incentivise employment”;
• Incentives for those out of work to return to the labour market, or risk reduced benefits;
• Minimum service levels, by law, to reduce strike action in key industries;
• Pension fund investments will be unlocked to allow investment into targeted growth projects;
• Existing enterprise investment scheme and share option plans will be enlarged;
• The government’s office of tax simplification will be wound down, with the process devolved to all departments;
• A guarantee that Bank of England financial independent will be maintained;
• VAT-free shopping for overseas visitors;
• Planned duty rate increases for alcohol will be cancelled;
• National insurance increases proposed for 2023 cancelled, as announced earlier this week, without reducing spend on HNS and social care services;
• The chancellor also repeated pledges for substantial financial help to keep house-hold and business energy bills below market levels for between six months and two years, sector-dependent.

Overall this represents a fundamental shift in the approach to the economy, moving almost 180 degrees away from the direction taken by Conservative and Labour governments over the past 20 years.

Kwarteng says there are three economic priorities for the new government – Reforming the supply side of economy; Responsible public finances;
And cutting taxes to promote growth.

More reforms to processes, especially planning, will be revealed in the coming weeks. This may just be the start of a revolution in the British economy.