Update: On the 17th October 2022, Chancellor of the Exchequer Jeremy Hunt brought forward a number of measures from his planned Medium-Term Fiscal Plan on 31 October. This has affected previous measures announced in the mini-budget on the 23rd September 2022.
The new chancellor Kwasi Kwarteng made his debut fiscal statement today, against the backdrop of a cost-of-living crisis and an economy in recession.
But the announcement was not as detailed as a full budget, so there were no updates on many issues of interest to members, like pension allowances and public sector pay.
Here’s our take on the key announcements and how they may impact doctors, dentists and teachers.
Tax
The chancellor’s big surprise was a cut to Income Tax.
Currently, people pay a 20% basic rate on earnings between £12,571 to £50,270, with a higher rate of 40% on earnings between £50,271 and £150,000 and an additional rate of 45% on earnings over £150,000*.
* UPDATED 3rd October - This measure was subsequently scrapped by Chancellor Kwasi Kwarteng.
But from April next year, the basic rate will fall to 19% and the additional rate will be abolished altogether.
A planned rise to Corporation Tax – which is based on companies’ annual profits – was reversed.
It was due to go up to 25% next April 2023 but will now stay at 19% in the hope that businesses will use this windfall to invest.
And the chancellor moved to repeal IR35 off-payroll working rules introduced in 2017 and 2021.
These are the rules designed to make sure contractors, including dental associates, locum doctors and supply teachers, pay broadly the same Income Tax and National Insurance contributions as employees.
This shift will put the burden back on the worker to determine their employment status, rather than the employer.
Stamp duty – paid by people buying property in England and Northern Ireland – was also slashed in an effort to get the housing market moving and increase home ownership.
At the moment, buyers pay no stamp duty on the first £125,000 (or the first £300,000 for first time buyers), and the rate paid then increases from 2% on the next £125,000, up to 12% payable on anything over £1.5m.
But from now on, no stamp duty will be paid on the first £250,000 of a property, and for first-time buyers the threshold will rise to £425,000.
The chancellor had already pre-empted today’s statement with the announcement that a 1.25% increase to national insurance from 12% to 13.25% would be reversed from November 6.
The hike came into force in April to fund improvements to the NHS and social care, which will now come from general taxation instead.
Energy
In the days before the fiscal statement, the government announced a six-month support package for businesses and public sector organisations, including schools, hospitals, GP practices and dental practices.
It meant that from October energy prices would be capped at around half the current wholesale price, with the difference paid by the Government.
Our view
Linda Wallace, Director of Wesleyan Financial Services at Wesleyan, said: “The reverse of the National Insurance increase that came in earlier this year, will be a relief for many, but further support will be needed to stop people struggling this winter.
“We know that many people are dipping into savings and pensions to cover their living expenses, but this should be done with proper long-term consideration as it can have a significant impact on future retirement plans.”
Iain Stevenson, Head of Education at Wesleyan, said: “While the energy support measures will be welcome, the hope would have been for additional funding to enable them to keep schools running and help to ease the burden of over-stretched budgets.”
Alec Collie, Head of Medical at Wesleyan, said: “It is painfully evident on the front line that GP practices have been hit hard by inflation. Costs have increased dramatically, yet funding has not kept pace. It means that practices are experiencing a huge squeeze in budgets and a dip in the value of their income in real and inflationary terms. Long-term, this isn’t sustainable.”
And Iain Stevenson, Head of Dental at Wesleyan, said: “Many practices are facing increasing costs due to the cost-of-living crisis, coupled with retention and pay increase considerations for staff, which are resulting in growing pressure on the bottom line. The reversal of the National Insurance increase will see small increases in take home pay, but more help is needed to ensure dentists can cover their living expenses.”