Newly appointed Chancellor, Jeremy Hunt, made a financial statement this morning, in which he reversed almost all of the announcements made last month by Kwasi Kwarteng in his “mini-budget”.
Mr Hunt said that, while it is a “deeply held conservative value” that people keep more of what they earn, “at a time when markets are rightly demanding commitments to sustainable public finances, it is not right to borrow to fund this tax cut.” He went on to reverse the proposed reduction to the basic rate of Income Tax.
Measures cancelled
Reduction of basic rate of Income Tax cancelled
The planned reduction of 1p in the pound (from 20p to 19p) on the basic rate of Income Tax has now been cancelled
Cuts to dividend tax rates cancelled
- The recently implemented 1.25 percentage point increase in dividend tax rates, applied UK wide, will remain in place.
VAT-free shopping scheme for non-UK visitors shelved
- Full details of the scheme had yet to be announced, but this idea has now been shelved.
Freeze on alcohol duty rates cancelled
- A planned freeze on duty for all categories of alcohol, due to come into effect in February 2023, has been cancelled.
Reversal of off-payroll working (IR35) reforms introduced in 2018 and 2021 cancelled
- IR35 was first introduced in 2000 to tackle tax avoidance by contractors and their employees.
- The reforms introduced in 2018 and 2021 will stay, meaning it will remain the responsibility of the employer to decide whether an employee is inside or outside IR35.
Measures remaining
Stamp Duty Land Tax threshold increase will remain
- The increase in the threshold from £125,000 to £250,000, which came into force in England and Northern Ireland on the day of Kwasi Kwarteng’s mini-budget, will remain in place.
- The higher Stamp Duty threshold of £425,000 for first-time buyers will also remain in place, as will the discounted first-time buyers’ Stamp Duty rate on properties up to £625,000.
National Insurance increase will remain in place
- Former Chancellor, Rishi Sunak, introduced a 1.25 percentage points rise to National Insurance Contributions, which will now remain in place.
Other measures already changed
Abolition of additional rate of tax cancelled
- Before he was removed from his post last week, former Chancellor Kwasi Kwarteng reversed the planned abolition of the 45% additional rate of tax.
Corporation Tax rise reinstated
Last week, Prime Minister Liz Truss, reversed Mr Kwarteng’s proposal to scrap a rise in Corporation Tax, originally set out by then Chancellor, Rishi Sunak. Therefore, for companies with profits over £250,000, Corporation Tax will still increase to 25% next year.
Other information and changes announced
Energy support measures
- The energy support package will remain in place. However, it will be reviewed in April 2023, rather than remaining in place for two years.
Mortgage rates
- It is thought there is little chance that mortgage rates will fall – the financial backdrop of high inflation remains and it is expected the Bank of England will tackle it with interest rate rises.
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