The Chancellor of the Exchequer, Kwasi Kwarteng, has announced a new ‘Growth Plan’ which set a target for 2.5% trend of growth, securing sustainable funding for public services and improving living standards for everyone.
Detailing the first steps towards growth, Chancellor Kwarteng revealed a package of major cuts to Stamp Duty Land Tax. The nil-rate band will be doubled from £125,000 to £250,000, meaning that 200,000 more people every year will be able to buy a home without paying any Stamp Duty at all. The standard buyer in England will save £2,500.
The cuts also mean first-time buyers will now pay no stamp duty up to £425,000, and the value of the property on which first time buyers can claim relief has been increased from £500,000 to £625,000.
The Chancellor also announced that he will increase the disposal of surplus government land to build new homes, increasing supply.
Plans have also been set out to tackle to the biggest drag on growth – the high cost of energy driven by Vladimir Putin’s invasion of Ukraine, which has driven up inflation.
To tackle this, the government’s Energy Price Guarantee will save the typical household £1,000 a year on their energy bill with the Energy Bill Relief Scheme halving the cost of business energy bills, reducing peak inflation by about five percentage points.
Also among the new measures revealed in the Growth Plan is cancelling the planned rise in corporation tax, keeping it the lowest in the G20 at 19%, and reversing the 1.25 percentage point rise in National Insurance contributions, a change which will save 920,000 businesses almost £10,000 on average next year.
The Chancellor also announced more relief for businesses by making the Annual Investment Allowance £1million permanently, rather than letting it return to £200,000 in March 2023. This gives 100% tax relief to businesses on their plant and machinery investments up to the higher £1 million limit.
It was also confirmed that the government is in discussion with 38 local and mayoral combined authority areas in England including Tees Valley, South Yorkshire and West of England to set up Investment Zones in specific sites within their area.
Each Investment Zone will offer tax cuts for businesses and liberalised planning rules to release more land for housing and commercial development. These will be hubs for growth, encouraging investment in new shopping centres, restaurants, apartments and offices, and creating new communities.
Kwasi Kwarteng also outlined sector specific support for pubs and hospitality, including freezing alcohol duty for another year.
The Chancellor also announced a 1p cut to the basic rate of income tax one year earlier than planned. From April 2023, the basic rate of income tax will be cut to 19% and will mean 31 million people will be better off by an average of £170 per year.
The Chancellor also abolished the additional rate of tax, taking effect from April 2023. In its place will be a single higher rate of income tax of 40%. The policy removes the UK’s previous top rate tax, which was higher than countries like Norway, USA and Italy.
Kwasi Kwarteng, said: “Economic growth isn’t some academic term with no connection to the real world. It means more jobs, higher pay and more money to fund public services, like schools and the NHS.
“This will not happen overnight but the tax cuts and reforms I’ve announced today – the biggest package in generations – send a clear signal that growth is our priority.
“Cuts to stamp duty will get the housing market moving and support first-time buyers to put down roots. New Investment Zones will bring business investment and release land for new homes in communities across the country. And we’re accelerating new road, rail and energy projects by removing restrictions that have slowed down progress for too long.
“We want businesses to invest in the UK, we want the brightest and the best to work here and we want better living standards for everyone.”
The full Growth Plan Speech 2022 can be found here.