UK Autumn Mini-Budget 2022

September 23, 2022

The UK fiscal event

As fiscal events go, this was a very significant one. It wasn't a formal budget, badged instead as a 'mini' budget by many commentators.

The UK Government however, preferred to refer to it as a 'growth plan' setting out their vision of the UK of the future - one with lower taxes, and a mindset of attracting people and businesses to settle and work there.

In the current inflationary climate and with a cost of living crisis making all the headlines, this is a bold statement of intent with cuts in 8 taxes overall.

The new Chancellor, Kwasi Kwarteng, is fighting back against recessionary pressures with a framework for economic growth.

Key tax announcements

Cancelling the planned increase to corporation tax from 19% to 25%
Abolishing the top rate of income tax for the highest earners - people earning more than £150,000 a year will no longer pay 45% but instead the lower 40% rate applicable to those with income over £50,271
A cut to the basic rate of income tax was confirmed, with the main rate falling from 20% to 19%
A cut to stamp duty on house purchases
VAT-free shopping to be introduced for overseas visitors.

Alongside these measures, the UK Government has already confirmed its intention to reverse a recently imposed increase in National Insurance rates via cancellation of the Health and Social Care Levy.

All in all this is a hugely significant effort to boost short-term economic growth, with a target rate of 2.5% per year, by addressing the UK's underlying issue of low productivity. Whether or not these measures have the desired impact (and in the desired short-term timeframe) remains to be seen.

Impact on the Isle of Man

As with any UK budget, there will inevitably be an impact felt by Isle of Man residents and businesses. The UK is our closest economic partner and the fortunes of the UK greatly influence how the Island's residents fare from an economic perspective. The impact this time though will perhaps be more noticeable.

The Isle of Man has recently rolled out its own Economic Strategy for the next ten to fifteen years. Underpinning that strategy is a desire to grow the economically active taxpayer base in the Island, resulting in many more skilled and well paid jobs, all with the aim of significantly increasing both GDP and tax collected.

Today's UK mini-budget has confirmed the UK Chancellor has a very similar (if not identical) strategy and that we should expect the competition for entrepreneurial talent to be fierce. Comparisons between UK and Isle of Man personal tax will be made, and in that regard the Island may need to reconsider its personal tax system. Tax cuts or new tax incentives may be needed to make our proposition more attractive; a prospect which will likely seem unappealing in such difficult economic times.