Earlier today (October 17th, 2022), Jeremy Hunt who has been Chancellor since Friday issued an ‘emergency statement’. In it, he scrapped almost all the tax measures which were announced in Kwasi Kwarteng’s mini budget just over three weeks ago.
This comes after the Prime Minister’s press conference on Friday which confirmed a major policy U-turn on corporation tax and is being referred to as the biggest U-turn in economic history.
What has been announced?
Almost all of the tax measures announced three weeks ago have now been scrapped with the exception of cuts to stamp duty and National Insurance (legislation surrounding these has already gone through the Commons).
The basic rate of income tax will now remain at 20% indefinitely
In the mini budget it was announced that this would decrease to 19% from April 2023, a year earlier than planned.
This rate will now not be cut until economic circumstances allow it.
Cap on energy bills will be reviewed.
The support being provided now will remain unchanged until April 2023 rather than for 2 years as announced in the mini budget. There will be a Treasury-led review into how households and businesses are helped with energy bills, and beyond April 2023 there will have to be changes.
Dividends, IR35 and VAT
The Chancellor also said “We will no longer be proceeding with the cuts to dividend tax rates, the reversal of off-payroll working reforms, the new VAT-free shopping scheme for non-UK visitors or the freeze on alcohol duty rates.”
Corporation tax will increase
On Friday afternoon it was confirmed that corporation tax will rise to 25% from 19% in a major policy U-turn.
45% income tax rate to remain
This was the first reversal of mini-budget policy just 10 days after it was announced when the government decided not to scrap the 45p highest income tax threshold after mounting pressure and market volatility.
Our thoughts
Whilst the budget reversal is extraordinary, it’s hardly surprising given the backlash since the mini budget on 23 September. Jeremy Hunt will be addressing the Commons at 3.30 this afternoon.
Disclaimer
The information was correct at time of publishing but may now be out of date.
