Baachu/ GROWTH PLAN 2022 – TAXATION, PENSIONS, INVESTMENT AND DEREGULATION

Baskar Sundaram
Baskar Sundaram

As part of today’s publication of the Growth Plan 2022, the Chancellor has made the following announcements which will be of particular interest to the Committees.

Corporation Tax

  • The Government has committed to cancel the increase in the main rate of Corporation Tax to 25% that was due to take effect from April 2023, keeping the rate at 19%.
  • In line with this, the scheduled change to the rate of the Bank Corporation Tax Surcharge will also be cancelled, keeping the combined rate of tax on profits paid by banks and building societies at 27%.
  • The increase in the Surcharge allowance to £100 million will go ahead as planned.

Pensions

  • The Government will bring forward draft regulations to remove well-designed performance fees from the occupational defined contribution pension charge cap.
  • There will also be one-year transitional period for Relief at Source (RAS) pension schemes to permit them to continue to claim tax relief at 20%.

Income Tax, NICs, and Dividend rates

  • The Government will bring forward the 1 percentage point cut to the basic rate of income tax to April 2023, 12 months earlier than planned.
  • It will also reduce NICs rates by 1.25 percentage points from November and cancel the Health and Social Care Levy coming in from April 2023.
  • The additional rate of income tax will also be removed from April 2023.
  • The Government will reverse the 1.25 percentage point increase in dividend tax rates from April 2023.
  • It will also bring forward the 1 percentage point cut to the basic rate of income tax to April 2023.
  • The additional rate of income tax will also be removed from April 2023.

Investment and the R&D Review

  • In 2021 the Government launched a review of the Research and Development (R&D) tax reliefs.
  • Several reforms have since been announced, including bringing pure mathematics research within scope of the reliefs, including data and cloud computing as new qualifying costs and refocusing the reliefs towards innovation in the UK.
  • The Government will continue the review, with any further reforms announced as usual at a fiscal event.
  • The Government will make permanent the temporary £1 million level of the Annual Investment Allowance (AIA), which was due to expire after 31 March 2023.
  • It will also introduce the Long-Term Investment for Technology & Science (LIFTS) competition, providing up to £500 million to support new funds designed to catalyse investment from pensions schemes and other investors into the UK’s pioneering science and technology

Investment Zones

  • The Government is in discussion with 38 Upper Tier Local Authorities and Mayoral Combined Authorities in England to set up Investment Zones in specific sites within their area.  
  • Annex A of the document linked below includes a full list, and also a list of illustrative sites.
  • Each Investment Zone will offer generous, targeted and time limited tax cuts for businesses and liberalised planning rules to release more land for housing and commercial development.
  • The Department for Levelling Up, Housing and Communities will shortly set out more detail on the planning offer.
  • A factsheet on the Investment Zones can be read here.

Deregulation and EU Exit

  • Later this Autumn the Government will bring forward a deregulatory package designed to unleash the potential of the UK financial services sector.
  • This will include the plan for repealing EU law for financial services and replacing it with rules tailor made for the UK, and scrapping EU rules from Solvency II.
  • You can read more about the Brexit Freedoms Bill here.

Full documents from the Growth Plan are here.

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