The new Chancellor of the Exchequer, Jeremy Hunt, yesterday announced that the Government would be reversing a number of further measures set out by his predecessor Kwasi Kwarteng in the mini-budget of 23 September.
A summary of all the u-turns and reversals of the past week can be found below:
Support for energy bills scaled back
Before the mini-budget, the Government announced their Energy Price Guarantee which would be in place for two years, to limit the price that suppliers could charge for each unit of energy.
Mr Hunt announced yesterday that the energy price guarantee will now only covers this winter, remaining in place until April 2023. The Treasury will conduct a review after this date to discern next steps, and it is expected any further support would be directed only to those with lower incomes.
Income tax – basic rate
The basic rate of income tax was to be cut to 19% from April 2023 for people in England, Wales and Northern Ireland (rates in Scotland are different). However, now the basic rate of income tax will remain at 20% and reducing it has been paused ‘indefinitely’.
Income tax – higher rate
The Government had already announced its u-turn on abolishing the higher rate of income tax before the new Chancellor took office. Kwasi Kwarteng’s proposal to remove this tax rate altogether has now been abandoned and the higher rate will remain.
The mini-budget proposed to cancel a UK-wide rise in corporation tax which was due to increase from 19% to 25% in April 2023. However, the Prime Minister announced on 14 October that the Government were rowing back on this policy and that UK corporation tax would go up from 19% to 25% in April 2023 after all.
IR35 reforms to remain in place
The government had been planning to change the rules on off-payroll working, known as IR35, so companies were no longer responsible for ensuring their contractors were paying the right amount of tax. However, his reform, which the government estimated would have cost £2bn a year, will no longer go ahead.
The share dividends was increased in April 2022, but was supposed to be reversed in April 2023, however that reversal will now be cancelled.
The remaining elements of the mini-budget
Some measures announced in the mini-budget have survived the u-turns and reversals and remain intact.
As announced in the mini-budget, National Insurance changes will still go ahead as the 1.25% rise in National Insurance will be cancelled on 6 November.
The proposed change in the stamp duty threshold in England and Northern Ireland from £125,000 to £250,000 will remain.
First-time buyers will pay the tax on properties costing more than £425,000. Discounted stamp duty for first-time buyers will apply up to £625,000.
We will be publishing a more comprehensive review of the Government’s full medium-term fiscal plan when it is announced on 31 October.
If you have any questions on how these changes may affect your financial planning, please do get in touch.