Reforms to IR35 payroll rules, which impact many IT contractors, are being scrapped, Chancellor of the Exchequer Kwasi Kwarteng announced in his “mini budget” presented to the House of Commons this morning. Proposals in the statement also also included a push for more enterprise zones, where taxes and business rates could be cut completely, and a focus on making Britain more entrepreneurial.
Kwarteng outlined details of the government’s “Growth Plan”, and told the House of Commons it marked the start of a “new era” for the British economy that the government hoped would “turn a vicious cycle of stagnation into a virtuous cycle of growth”.
He faced jeers and boos from the house as he announced plans to cut banker bonuses and declared that the “new approach for a new era” would be built around three central principles: reform of the supply side of the economy, a responsible approach to public finances and reducing taxes to boost growth.
This will include scrapping the higher rate of income tax so the new top rate will be 40%, rather than the current 45% and reducing the lower rate of income tax from 20% to 19% in April next year.
The Office for Tax Simplification, launched a decade ago, will be scrapped under the new plan for growth, with the chancellor claiming that he would “embed tax simplification in the heart of government and mandate every tax official to simplify the tax code”.
Mini-budget: IR35 changes scrapped
In addition, the IR35 rules, which affect many IT contractors, will be simplified, with reforms introduced in 2017 and 2021 being scrapped completely. From April, workers across the UK will be responsible for setting their employment status and ensuring they pay the appropriate amount of tax and national insurance contributions.
The reforms had put this burden on the “end client” – the business or recruitment through which the staff member was employed – and Kwarteng believes scrapping the requirement will make it easier for companies to hire new staff.
Kwarteng confirmed previously announced plans to reduce the impact of rising energy prices on businesses including a price guarantee, equivalent to that for already put in place for consumers, being given to businesses across the country until March next uear. These incentives, coupled with those for household, are expected to cost at least £60bn over the next six months.
There will also be a new energy markets financing scheme aimed at the power companies that will provide a 100% guarantee to commercial banks that offer liquidity to these providers.
In addition to energy savings, the Chancellor proposed a number of measured designed to “make it easier to do business” including scrapping the upcoming increase in corporation tax and a £500m budget to attract new funds that will invest in UK science and technology scale-ups.
It isn’t just tax being put on the chopping block. Kwarteng also announced a bonfire of planning regulations, particularly around new enterprise zones. This will be coupled with accelerated tax relief for ten years for new buildings and 100% tax relief for plant and machinery costs in these zones.
He confirmed there would be no stamp duty on new commercial developments and a break on business rates in newly occupied buildings that he claims will make it easier for companies “to invest, build and create jobs right across the country”.
The Treasury has been in discussion with English regions, including in the Tees Valley, West Midlands, Norfolk and the West of England about new enterprise zones, according to Kwarteng, who added that he was also in discussion with the other nations of the UK. “If we really want to level up we have to unleash the power of the private sector,” he said.
Labour’s shadow chancellor Rachel Reeves described the budget as a “menu without prices” and a “budget without figures”, calling for more detail on who will pay for the tax cuts.
She declared “the Conservatives cannot solve the cost of living crisis, the Conservatives are the cost of living crisis” and accused Kwarteng of “shamelessly shielding” bankers’ bonusses and energy giants.