WellTax Blog

Growth Plan 2022: government announces AIA increase, CSOP limit increase and IR35 simplification

April 10, 2022

On Friday 23 September, the new Chancellor, Kwasi Kwarteng, revealed his Growth Plan, confirming a significant package of tax cuts targeted at encouraging economic growth.

One of the steps to boost UK businesses and stimulate growth is to permanently fix the Annual Investment Allowance at £1M, rather than allowing it to decrease to £200k in April 2023, as previously envisioned.

This action will support business investments in plant and machinery and encourage them to invest in new and more efficient technologies.

The measure is set to provide up to £1.3bn boost to businesses by 2024-25.

The Chancellor has also announced intentions to eliminate the IR35 off payroll working restrictions for the public and private sector beginning with the tax year 2023–24 in order to further assist businesses and simplify the tax system.

The IR35 rules were introduced to face tax avoidance and included a complex set of rules to identify whether an individual should be defined as self-employed or paid on a PAYE basis.

After the existing laws will be repealed on 6 April 2023, employees who provide their services through an intermediary will be in charge of identifying their employment status and paying the proper taxes and National Insurance payments. This will free up time and money for businesses that could be put towards other priorities.

The Government has also recognised private-sector investment as a critical area for boosting the UK economy.

From April 2023, companies will be granted access to £250k of SEIS (Seed Enterprise Investment Scheme) investments, a two-third increase on the current limit.

Additionally, limitations on gross assets and firm age will be loosened to allow the plan to be used by more than 2,000 enterprises annually. Individual investors are also eligible for the advantages and will be able to invest up to £200k, which is double the existing limit.

It was also revealed that the present Company Share Option Plans (CSOPs) will be doubled from £30k to £60k.

These tax-advantaged share incentives enable firms to offer employees tax-efficient share options, and it is believed that revisions to the present CSOP laws could make this scheme a more effective way of incentivizing employees and attracting new talent.

Maja Tamiazzo

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