This was a budget about tax. Income, stamp duty and corporation tax have all been cut (or planned increases cancelled).

National insurance (NI) increases have been reversed, and the additional 45 per cent marginal rate of income tax paid by those with income over £150,000 will soon become a thing of the past. Here is what it all means.

How much tax you will save

You will start to notice a change in your pay packet come November, but the real savings will kick in April next year.
From that time onwards, taking account of the income tax and national savings changes, someone who is earning £20,000 will be £18 a month better off a month, according to the accountancy firm Blick Rothenberg. 

If you earn £30,000 it will be £33 a month; for someone earning £40,000 it will be £47; and anyone with a salary of £50,000 will be £61 better off. If you’re lucky enough to earn £100,000 you will have £92 more a month.

Someone who qualifies as being an additional-rate tax payer (according to latest Government figures there are 629,000 people in this group) earning £151,000 a year, will have a monthly saving of £123 due to their new lower marginal tax rate of 40 per cent.

Call your payroll department in November

While the reduction in NI will be welcomed by employers and employees, it will be less popular with payroll teams.

Accountants are warning that some companies won’t be able to change their payrolls in time for the change coming into effect in November. 

This could cause payment delays that will in turn need to be refunded at a later date. You should call your payroll department in November to check that the relevant reduction in NI has been made – particularly if you work for a smaller company.

More from Saving and Banking

Investors benefit too

Chancellor Kwasi Kwarteng was crystal clear he wants us to be a share-owning nation. He also announced a reversal of the dividend tax rise, which will save investors and self-employed workers an average £345 a year.

The dividend tax rate was increased at the same time and by the same amount as the NI increase by Rishi Sunak earlier this year – by 1.25 percentage points.

The original rationale for co-ordinating both changes was to prevent self-employed individuals, who might pay themselves through a limited company, avoiding the NI increase by paying themselves a higher dividend instead.

Investors who make money through dividends (payments from companies to their shareholders as a “thank you” for keeping their shares) are the obvious beneficiaries of the move.

David Henry, Investment Manager at Quilter Cheviot, said: “These changes will particularly benefit those individuals who draw an income from their investment portfolio to assist with living costs.”

Someone with £10,000 of dividend income stands to save £100 a year under the new rate.

Trying to understand the tax system

The Chancellor has also decided the Office of Tax Simplification (OTS) will be wound up and be incorporated within the Treasury. The UK is a world leader in the complexity of its tax code and this office was set up in 2010 to identify ways for the rules to be more straightforward and streamlined.

It is possible that some of the OTS’s previous recommendations – such as overhauling capital gains tax – did not chime with the new administration. Only last November, the Government said it was “committed to supporting the OTS in continuing to play its important role”.

Childcare

Parents who are currently paying nursery fees will be buoyed by a small commitment the Chancellor made to reform childcare, although no details have been released.

Economists have in recent years pointed out that the high price of childcare in the UK has stopped working mothers going back to the office, potentially constraining economic growth by as much as 1 per cent of GDP. A further announcement is awaited.

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