Mini-budget: What does this mean for investors?

New Chancellor Kwasi Kwarteng (pictured) unveiled his not-so-mini budget today, which included a raft of tax cuts that will benefit those with savings and investments.

The basic rate of income tax will be cut from 20 per cent to 19 per cent next April, while the highest tax band for people who earn over £150,000 a year – 45 per cent – has been axed.

These changes come after the proposed rise to National Insurance was reversed.

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“There’s good news for additional rate taxpayers with savings, who should now benefit from a personal savings allowance (it’s £1,000 for basic rate taxpayers, £500 for higher rate taxpayers),” said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.

“Once they have bust this allowance, they will pay income tax on the excess, so they’ll also pay tax on their savings interest at a lower rate. Basic rate taxpayers will also be paying a lower rate of tax on any interest over the threshold and outside of a cash ISA. This is increasingly something people need to think about, as rising interest rates mean more chance of being pushed over the threshold.”

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The Treasury also announced a cut in dividend tax rates today, which will benefit investors. The axing of the highest tax band means that those people will now pay dividend tax at a lower rate too.

Today’s changes will give wealthier individuals a larger pot from which to invest, which could result in greater inflows into the peer-to-peer lending sector in a bid to protect their portfolios from rising inflation.

Investors were also given a boost today by the extension of the Venture Capital (VCT) and Enterprise Investment Schemes (EIS).

While no further details have been given at this stage, the announcement follows a Treasury Select Committee inquiry into the UK’s venture capital market.

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“It is great to see the chancellor announcing the extension of the VCT and EIS, especially after a year or so of speculation about whether a looming Sunset Clause could see the industry shut down in April 2025,” said Alex Davies, chief executive and founder of Wealth Club.

“Removing this uncertainty should give investors the confidence to continue supporting this key engine of British innovation.”