Irwin Mitchell Experts Share Their Views
Chancellor Kwasi Kwarteng delivered his ‘Mini’ Budget on Friday 23 September 2022 setting out the Government’s tax and spending plans. Our experts share their views and explain how some of the announcements may affect you:
Jeremy Raj, National Head of Residential Property at Irwin Mitchell comments:
Expert Opinion“These new measures will be greeted particularly warmly by buyers at the lower end of the market and by first time buyers, who will either benefit from a significant reduction in the amount of tax payable on transactions already in progress, or – as is the government’s aim – be encouraged to take that first step onto the housing ladder.
“It also appears to have been carefully constructed to ensure that the overall SDLT take of some £12Billion will not take too much of a hit, given the very high rates at the top of the market, which account for a large percentage of the total. Anything that stimulates the market without depleting the Government’s coffers excessively is likely to be helpful to the economy overall and on that basis should be applauded, particularly given that addressing the fundamental supply-side issues in our housing market can only be achieved over the long term. It is accordingly essential that Government does not now say ’problem solved’ and allow house building and reform of the planning system to drop off the agenda.
“This is a good fillip to the market, but will not address the key issue of a shortage of the right housing stock in the right locations. Given the context of rising interest rates and high energy costs, it is also vital that buyers carefully review the overall affordability of any purchase, bearing in mind that both of those costs are likely to remain at their newly escalated levels or to rise further.” Jeremy Raj - Partner
Helen Hutchison, Head of Irwin Mitchell’s Sheffield Conveyancing Team, added:
Expert Opinion“Our clients and conveyancers will now be breathing a huge sigh of relief that the previous ‘holiday’ model of SDLT changes has been replaced with permanent changes and a much more user-friendly regime for ordinary buyers. For the majority of our clients this will be a welcome bonus as we head in to what looks like a difficult winter and we are looking forward to processing all our clients with a lower tax bill and no artificial deadlines.” Helen Hutchison - Partner & Chartered Legal Executive
Commenting on the tax announcements, John Bunker, Consultant Solicitor and Chartered Tax Advisor at Irwin Mitchell said:
Expert Opinion“This mini budget is anything but mini, as we expected there was a huge focus on cutting taxes in a bid to stimulate economic growth. We expected the Health and Social Care Levy of 1.25% on National Insurance Contributions to be withdrawn and the staged Corporation Tax increases to be held at 19% rather than going up to 25%. However the Chancellor also dropped the bombshell that the Office of Tax Simplification will be removed completely, which raises the question of why?
“It was also announced that the 45% tax rate for those who earn over £150k will be completely scrapped instead of cut, and that Stamp Duty will be cut, enabling those to buy houses up to a value of £250k without paying any.
“This increase in the nil-rate Stamp Duty (SDLT) rate is a surprising boost to the lower end of the market and first time buyers in particular, who will also benefit from additional relief; the fact that the change is permanent rather than a 'holiday' is particularly welcome both to the housing market and to conveyancers.
It’s interesting to hear that the Government will release full costing analysis for the measures proposed - £60bn as a starting figure is quite significant when you consider that this will all be added to the national debt.” John Bunker - Consultant Solicitor and Chartered Tax Adviser
Ian Rex-Hawkes, Financial Planner at Irwin Mitchell said:
“With a new Prime Minister in Liz Truss, it is not surprising to see a fairly immediate statement on the country’s finances. What was surprising is the scale of the statement, as it covered an enormous range of subjects and represents a genuine sea-change in the approach to managing the economy.
“There are some benefits for lower earners in this statement. In short, these are:
“Confirmation of a price cap on energy tariffs, meaning the average house will pay £2,500 a year. The excess will be funded by the government through borrowing, meaning the national debt will increase going forward. Importantly, the average is based on a cap on unit price, meaning households with greater usages (e.g. those with medical equipment on site) may still spend more than this.
“Having said that, lower earners may suffer because the energy cap still represents a much higher level than the lowest earners can afford and Universal Credit recipients will have their benefits cut if they fail to meet requirements for seeking work.
“As expected, the national insurance contribution increase will not go ahead and will save 2.5% combined for individuals, split between employers and employees. This was originally earmarked as funding for social care, so presumably this will need to be funded from elsewhere now.
“There are the obvious benefits for higher earners – the abolition of additional rate tax band, the scrapping of the bankers’ bonus cap, the cutting of corporation tax and reversal of the recent IR-35 changes.
“Overall, there will be some issues that raise concern; no costings were provided within this statement and projections by the Office of Budget Responsibility were very specifically suppressed.
“The Office of Tax Simplification was scrapped as part of this statement, meaning less independent oversight of Government initiatives.
“Economic growth as measured by GDP targeted at 2.5% annually going forward, but little information about how this will be achieved, especially in light of the Bank of England stating this week that we may currently be in recession.
“The energy cap is expected to result in a reduction of inflation of around 5%, but it is important to note that this cost is still going to be paid by the country as a whole, meaning it is likely to add to national debt for generations.”