Mini budget tax cuts reversed in the Chancellor’s emergency statement
The newly appointed Chancellor, Jeremy Hunt, today reversed “almost all” of the previously announced mini budget tax cuts by his predecessor, Kwasi Kwarteng, delivered approximately three weeks ago. The Chancellor also confirmed scaled back support for energy bills from April 2023.
In the emergency statement, which brought forward measures from the Medium-Term Fiscal Plan, the Chancellor confirmed that the proposed 1p cut to income tax is to be delayed “indefinitely” until such time as the UK’s finances improve. This decrease was previously brought forward from April 2024 to April 2023 in Kwasi Kwarteng’s mini budget.
The newly appointed Chancellor, Mr Hunt, also announced that the government’s energy price guarantee will only be universal until April 2023, not for two years as previously planned. Following this, it is planned that the scheme will be more targeted following a review which is to be undertaken.
The Treasury believes these tax measures will bring in £32bn. It is understood that economists estimate the Government was facing a £60bn black hole in public finances following the mini budget announcements.
What mini budget tax cuts remain?
A handful of the mini budget tax cuts will not be reversed, as they are already going through Parliament. These include reversing the increase in national insurance contributions and the proposed stamp duty cut, including extending the cap at which first time buyers can take advantage of a lower rate.
The increase of the Annual Investment Allowance (AIA) is also understood to be permanently remaining at £1 million, rather than being reduced back down to £200,000.
What mini budget tax cuts are being scrapped?
As we currently understand it, essentially all the other tax cuts announced in the mini budget are being scrapped. These include:
- Dividend tax rates are to remain and not be cut
- The Repeal of IR35 rules for the self-employed which were introduced in 2017 and 2021 will no longer go ahead, keeping the emphasis on employers
- The newly proposed VAT-free shopping scheme for overseas visitors to the UK will not go ahead
- There will be no freeze on alcohol duty rates
- The basic rate of income tax is to remain at 20% indefinitely and will not be reduced to 19% from April 2023
- The existing energy price guarantee will now only be in place until April 2023
- As previously Announced by Liz Truss, the increase in corporation tax to 25% in April 2023 is now to go ahead
What is the next stage in the Chancellor’s plan?
The Chancellor is to deliver the full Medium-Term Fiscal Plan to Parliament on 31 October 2022. This will be published alongside a forecast provided by the independent Office for Budget Responsibility (OBR) at the same time.
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