From the Private Client Team:

The Chancellor’s mini-budget was relatively eventful, it was a return to classic Conservatism (some commentators say even “Thatcher like”) in one way, and a forward-looking attitude to debt in another. They have set out a clear remit on trying to grow the economy, and from the government’s perspective, they see the best way of doing so is by stimulating business and investment.

Cutting Stamp Duty on business premises, and National Insurance contributions for new employees along with scrapping the planned corporation tax rise illustrates the new government’s belief that creating strong and thriving business are the key to a stronger economy.

For the individual, it was good news for the top 2% of earners with the additional rate tax band of 45% being scrapped from April 2023, alongside a 1% reduction in the basic rate banding from 20% to 19%. The planned NI increase will also be scrapped, and these small tweaks will go some way in helping the average earner. The packages announced to assist with the rising cost of energy for homes and business alike also signpost the commitment of this government to avoid recession over the coming months. This will mean the government taking on additional borrowing to achieve this aim.

Realistically with no changes to pension legislation and Capital Gains Tax rates, our processes in helping ensure clients’ income and assets can work as efficiently as possible will not change too much.

Joshua Collis, Adviser

From the Investment Team:

We watched the market reaction as Kwasi Kwarteng stepped up to the despatch box and took an axe to the budget of his predecessor. He cancelled the rise in corporation tax, reversed the National Insurance rise, lowered the basic rate of income tax to 19% and scrapped the additional 45% income tax rate. His approach was to favour much simpler tax cutting measures as opposed to complicated rules and schemes to get businesses to invest. He has explicitly targeted growing the economy at 2.5% a year and believes these cuts will “unleash the private sector” to get us there.

With both the pound and stock prices falling, markets have not reacted well to the mini-budget. However, the big move during the announcement was the yield on government debt. The 10-year yield in gilts (the rate at which the government borrows) was down at the beginning of the day but had risen 0.20 percentage points by the end of the speech to 3.7%. This is a large increase on the lows of 0.10% seen in the middle of 2020 and will increase the amount of interest paid as a percent of GDP that was previously at 70-year lows.

Jacob Reynolds, Head of Asset Management and James Timpson, Deputy Fund Manager

From the Corporate Client Team:

The government will be bringing forward draft regulations to allow Defined Contribution pension scheme members to take advantage of potentially more lucrative investment opportunities and returns over the longer term, to potentially enable members to build up a better nest egg for their retirement.

At the same time it should help boost investment into more innovative businesses and increase investment in productive assets, within the UK.

Sagar Dholiwar, Head of Corporate Clients

Look out for further information from us in the coming days.