Experts from Thomson Snell & Passmore respond to the ‘mini budget’

Chancellor Kwasi Kwarteng has unveiled his so called ‘mini budget’, including a range of tax cutting announcements. Here, experts from across law firm Thomson Snell & Passmore’s departments explore exactly what this means for individuals and business.

Joanne Gallagher, Head of Corporate & Commercial comments: “The announcements made by the new Chancellor of the Exchequer, Kwasi Kwarteng, in his ‘mini-budget’, are firmly aimed at kick starting business growth and hopefully helping avoid a recession. While the longer term economic impact of these tax cuts remains to be seen, we certainly think they will be welcome news to our corporate clients across the mid-market space in the South East and nationally.

“Perhaps the most anticipated move was scrapping the planned rise in corporation tax from 19% to 25%. It is hoped that by keeping corporation tax rates low, the UK will remain an attractive market for investors. This, combined with a reversal of planned National Insurance increases and other tax reliefs such as the expansion of the Enterprise Investment Scheme, will be a great relief to many UK businesses who have been feeling the squeeze of inflation and an increasingly cautious public appetite for spending.”

From a commercial property perspective, Laura Keatley, Partner in the Commercial Property team adds:

“Today’s Mini-Budget announced a package of new measures affecting the commercial and residential property markets.

“The government has announced that it will be setting up “new investment centres” around the country. These centres will provide accelerated tax relief for structures/buildings and 100% tax relief on purchases of land for commercial and residential developments. The detail of the reliefs and how they will be claimed is yet to be seen but it will be welcome news. The tax reliefs and the relaxation of planning rules in these areas are hoped will encourage hubs for growth and increase the speed of delivering development. Landowners and developers alike will be hoping that these changes facilitate increased investment and opportunities in the wider community surrounding the chosen areas, for example with the creation of housing developments and commercial developments including new retail space/restaurants/offices.

“Whilst good news, the impact of these measures on our clients will largely depend on the location of the 40 local areas chosen by the Government – we expect some backlash from the areas ‘left behind’ and wonder whether this will simply be a furtherance of “levelling up”. There is also the question of whether environmental protections should be watered down in the chosen areas to make way for new development. While development opportunities increase, there may be concerns from some about the impact upon the green belt. Again, this may depend upon the areas chosen.

“In the residential property market the mini-budget announced that, effective from today, stamp duty tax will be cut. No stamp duty will be payable on the first £250,000 of a property (this threshold will increase to £425,000 for first time buyers). The Chancellor of the Exchequer has said this will take more than 200,000 buyers out of paying for stamp duty. For several months our clients and contacts have been speaking of a potential slow down in the housing market arising from what some perceived to be peak prices arising simultaneously with rising costs of living – this measure is likely intended to stave off buyer caution and seek to ensure that developers have a market of home owners waiting to buy new stock. This in turn should encourage developers to keep building and hit Governmental targets for the delivery of new homes.”

Guy Evans in the Property Litigation team comments:

“The announcement of new investment zones will call to mind previous government policies for freeports and enterprise zones. The investment zones promise to create new low-tax, low-regulation areas for businesses, but unlike previous policies will also relax rules for residential development. While the investment zones will be welcomed in the areas of the country they are to be introduced, their benefits may only have a relatively local impact.

Most developers and planners will be more interested in the forthcoming changes to the wider planning system which the Chancellor today promised to announce in the coming weeks.”

In terms of residential conveyancing, Rebecca Swain, Head of Residential Conveyancing says:

“We had not yet experienced any significant slowing in the market following the end of the SDLT holiday (introduced during the pandemic).  In our core market areas, demand for property appears to continue to outstrip supply but others in the industry were predicting a cooler market when increases in inflation and interest rates start to bite.

“As we saw with the SDLT savings introduced during the pandemic, a boost to the property market can ripple through to the wider economy.

“It will remain to be seen whether the announcement to increase the threshold for first time buyers to £425,000 (on purchases up to £625,000) will be enough to offset interest rate increases, but it will represent a significant saving.  For existing property owners moving home, a saving of up to £2,500 will also be welcome.

“It is a relief that the cut in SDLT rates is permanent and will take effect immediately. When rumours of a cut surfaced on Wednesday, another time-limited discount (as we experienced during the pandemic) raised fears of further bottlenecks in the market when the period ends, as we saw in June and September 2021.”

Nick Hobden, Head of Employment concludes:

“Today’s budget from the Chancellor of the Exchequer aims to make growth of the UK economy at the centre of the Conservative government‘s economic policy, to counteract high energy bills, higher inflation and avoid recession. The measures introduced by the Chancellor today include:

1. scrapping the national insurance rate rise that was planned in the previous parliament.

2. abolishing the top rate of income tax for higher earners entirely meaning that they will not be taxed at 45% anymore.

3. reducing the basic rate of income tax from 20% down to 19%.

“These and other measures are aimed to put more money into the pockets of the UK working population to enable them to help grow the economy by being able to spend more. To what extent this will have higher inflationary consequences, with the prospect of further interest rate rises remains to be seen.”

“Employers will surely welcome these measures in the sense that they will recognise that putting more money into the pockets of staff by a reduced tax burden may mean that there is less pressure to award higher rates of pay increases in the coming year.”