The Government’s Growth Plan (the Plan) has received a mixed reception, both politically and in the financial markets, with considerable economic turmoil since it was announced on 23 September. While most of the Plan’s key proposals appear to be going ahead, the Chancellor stated on Tuesday this week that the removal of the 45% additional rate of income tax for higher earners will not now proceed.
The opening statement of the Plan clarifies that the Government’s overall mission is to promote growth, with a view to generating higher wages and greater opportunities. Whether the intended impact on the economy is achievable remains to be seen, but in the meantime UK employers will need to assess the potential impact on their business. With this in mind, we summarise the proposals below and suggest action points for employers to take.
The 1% cut to the basic rate of income tax, which was originally intended to take effect in April 2024, has been brought forward by 12 months. From April 2023, the rate will be 19%, rather than the current 20%. This change will affect employees in England and Wales, but not those in Scotland, where tax rates are devolved.
The 1.25% increase in Class national insurance contributions (NICs) which took effect earlier this year, will be reversed with effect from 6 November 2022. Further, the proposed Health and Social Care Levy, which was due to take effect next April and replace the increase in NICs, will also be scrapped.
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