Posted by James Pearson on 24 Oct 2022
Mini Budget Reversal
On 17 October we saw the commencement of a new chapter in the saga of September’s ‘mini budget’. The latest Chancellor, Jeremy Hunt, took pen to paper and drew a line through most of the policies announced by the previous Chancellor just a few weeks ago.
Anything announced on the 23rd of September that had not begun the journey through the parliamentary process has effectively been scrapped. This means, that all that remains of the ‘mini budget’ is the increase in the 0% threshold for stamp duty and the reduction of the National Insurance Levy with its accompanying repeal of the Health and Social Care Levy bill.
We had already seen a U-turn on a number of the features of the mini-budget, the removal of the 45% enhanced rate of income tax had already been abandoned, as had plans to keep Corporation Tax at 19% rather than the previously proposed 25%. However, under this morning’s announcement we also saw the following reversals:
- The basic rate for income tax will remain at 20%
- The proposed VAT-free shopping for overseas visitors will no longer be introduced.
- The 1.25% increase in dividend rates for 2022/23 will stay in place.
- The much-lauded (by the Prime Minister) energy price guarantee package will no longer be supported for the 2 years as promised but will end in April 2023.
- The announced changes to the IR35 rules that would have returned responsibility for IR35 compliance to the contractor rather than the end client have been scrapped.
There are still a few areas of uncertainty; the new Chancellor has yet to specifically address the future of the new Investment Zones introduced on the 23rd of September, nor has he made any mention of whether we can expect the AIA to remain permanently at £1m as was announced last month.
On the 31st of October, we can expect to hear further from the new Chancellor as he presents his ‘Medium-term Fiscal Plan’ which will outline his plans to deliver his commitment to reducing government debt. We can therefore expect details of Government spending cuts and potentially more tax changes; this will be accompanied by a QBR forecast, something which was sorely lacking from the September mini-budget.
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