Mini Budget 2022: Cost of Living Crisis

The chancellor said this was a budget that would “unleash the power of the private sector”, in practice this meant tax cuts, but will this provide relief for UK businesses and individuals? This was published on 23 September 2022.

*For the latest information please see our mini budget summary

The host of measures announced in the mini budget and over recent weeks make it fairly bewildering to assess where your financial position stands at the end of all this. What are the main factors to consider in assessing your position after this raft of changes?

At the outset it is worth remembering that the crisis is being caused by inflation running at over 10% driven by rampant energy prices. No individual or business can escape this reality and it remains the key factor in assessing where you stand.

What will the announcement mean for individuals?

From an individual’s perspective, any measures announced today can only provide a partial counterbalance to the personal inflation everyone is feeling. This was heightened with the 0.5% interest rate increase announced yesterday that will hurt people’s finances most keenly when it comes to organising their next mortgage deal or personal loan, with many forecasters predicting a 4% interest rate within 12 months, something which becomes more likely with the tax cutting announcements today.

On the plus side there are a number of measures coming that will help the personal finances: the household energy rate cap will kick in from 1 October followed by the NIC rate reduction confirmed today from November. This will then be followed by income tax rate cuts from April 2023. Those moving house will benefit from a Stamp Duty Land Tax (SDLT) cut (beware the cost of that new mortgage though) and specific measures such as alcohol duty freezes and dividend rate reductions may help around the edges.

And for businesses?

For companies, the scrapping of the planned increase in corporation tax to 25% from the current level of 19% will surely be welcome news, as will the knowledge that annual investment allowance is set to remain at £1m permanently rather than dropping to £200,000 in March 2023 as previously planned. The announcement of Investment Zones benefitting from many different tax reliefs seemed to be a cornerstone policy to kick start levelling up around the country.

These measures are introduced by a Chancellor with a mission to grow the supply side of the economy who certainly aims to incentivise capital expenditure. However, with the announcement of a rise in the base rate of interest to 2.25%, the highest since 2008, the question remains as to how many businesses will be willing to borrow to fund any further capital expenditure?

Kwasi Kwarteng also announced that the 1.25% health and social care levy would be scrapped from 6 November, a change which he claimed will save 920,000 businesses on average almost £10,000 next year. However; with the unemployment rate at 3.6%, the lowest rate since May to July 1974, will this reduction really reduce the costs for businesses, or will they simply fuel inflation in an economy already nearing productive capacity?

An ambitious plan

In summary, the Chancellor announced an ambitious but unproven plan to turbocharge growth in the economy. Whether that plan can be achieved will be the ultimate arbiter for most UK people and businesses in how they weather the cost-of-living crisis and their prospects as we emerge from it.

Find out more

To find out more about the announcements made, register for our mini budget webinar 

Register here