The new chancellor has completely reset the government’s economic plans in an attempt to reassure markets and calm the fiscal chaos of the last couple of weeks. Having been in his position for just a few days, Jeremy Hunt has today announced that all bar two of the policies made by his predecessor Kwasi Kwarteng have been unwound.
More information about the latest announcements which the Chancellor expects to raise £32bn are below:
National Insurance no change: The national insurance rate rise of 1.25 percentage points was scrapped in September and the legislative process to make this happen is well underway. The cut to NI is expected to save nearly 28 million people an average of £330 per year.
Stamp duty no change: the former chancellor’s changes to stamp duty remain in place. The threshold for stamp duty on house buyers has doubled to £250,000 and for first time buyers is now £425,000.
Dividend tax rates: will not be reduced, meaning that they will remain at 1.25% higher than pre-April 2022.
Income tax change reversed: The basic rate of income tax was going to be cut from 20 pence in the pound to 19 pence next April – but this has been reversed, and the basic 20 pence rate will be held “indefinitely”.
Corporation tax change reversed: Plans to stop corporation tax (the tax companies pay on their profits) from rising next April were scrapped by Liz Truss on Friday in a big U-turn. The corporation tax rate will go up from 19% to 25% in April 2023 after all.
VAT free shopping for overseas visitors change reversed: the decision to boost international tourist spending by introducing VAT free shopping for them has been scrapped
Tax rate on dividend income change reversed: The cut in the tax rate on dividend income will also not happen from 6 April 2023
Alcohol duty change reversed: The decision to freeze alcohol duty rates from 1 February 2023 for a year has been ditched
IR35 reforms for freelancers and contractors change reversed: Plans to repeal the 2017 and 2021 reforms to IR35 rules have been scrapped
Annual Investment allowance: Will remain at £1 million. It was previously due to decrease to £200,000.
Company Share Plan and Seed Enterprise Investment Scheme: Changes will remain.
Higher rate income tax change reversed: the Trussonomics plan to scrap the 45 pence rate of income tax was reversed last week, meaning anyone who earns more than £150,000 a year will still be taxed at 45 pence in the pound.
Energy price guarantee now only six months: A key part of the September mini-budget was the “energy price guarantee” for two years for households and six months for businesses. This has now been limited to six months for all energy users, after which it will be re-examined in a Treasury-led review.
The Chancellor is due to deliver his medium-term fiscal plan on 31 October 2022 which should include financial forecasts from the Office for Budget Responsibility. He also said that more tax increases might be needed, so watch this space as we’ll be providing updates when we find out more.
If you would like to discuss any of the announcements made and how they affect you or your business, please get in touch with a member of the team.