Posted: Mon 17th Oct 2022
New chancellor Jeremy Hunt has announced a reversal of the majority of the remaining tax measures in last month's mini-Budget.
Hunt brought forward announcements that were originally planned for 31 October in an attempt to reassure the financial markets which have been in turmoil since Kwasi Kwarteng unveiled several tax cuts in his mini-Budget on 23 September without outlining how the government would pay for them. Kwarteng was fired as chancellor by prime minister Liz Truss last Friday.
The government has already u-turned on plans to scrap the 45p of income tax and ditch an increase in corporation tax.
The measures changed today are:
DROPPED: 1p cut in 20p rate of income tax. The cut due to take place in April 2023 will not go ahead. It will remain at 20% "indefinitely".
DROPPED: Repeal of IR35 reforms. The mini-Budget announced that the 2017 and 2021 reforms to the off-payroll working rules, also known as IR35, were to be scrapped. The changes require the end client to determine the employment status of a contractor and pay the appropriate amount of income tax and national insurance. They were designed to stop "disguised self-employment" but have been heavily criticised as placing too many burdens on businesses. The mini-Budget announced that the responsibility for determining their employment status would return to contractors providing their services. That will no longer happen and the 2017 and 2021 reforms remain in place.
DROPPED: Reversing increase to dividends tax. A 1.25 percentage points increase to dividends tax took effect in April 2022. The mini-Budget reversed this increase but it will now remain in place and will not be reversed.
DROPPED: Freezing alcohol duty rates from 1 February 2023 for a year. This freeze will not go ahead.
DROPPED: New VAT-free shopping scheme for non-UK visitors to Great Britain. This will not go ahead.
Watch the Chancellor @Jeremy_Hunt’s statement outlining the measures being brought forward from the Medium-Term Fiscal Plan that will support fiscal sustainability.https://t.co/faGd6A9YVp pic.twitter.com/1MWp4Y2ewv— HM Treasury (@hmtreasury) October 17, 2022
On energy bills support, the government's Energy Price Guarantee for consumers was due to run for two years. For businesses, the Energy Bill Relief Scheme runs for six months until April 2023 with a review before that on how the most vulnerable businesses can continue to be supported.
In his emergency statement, Jeremy Hunt announced that he has agreed with the prime minister that it would be "irresponsible for the government to continue exposing the public finances to unlimited volatility in international gas prices".
A Treasury-led review will be launched to consider how to support households and businesses with energy bills after April 2023.
A Treasury press release said: "The objective of the review is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need."
The chancellor said in his statement that any support for businesses will be "targeted to those most affected, and that the new approach will better incentivise energy efficiency".
The cut to stamp duty and the reversal of the increase in National Insurance will still go ahead.
The extension of the Seed Enterprise Investment Scheme and the Company Share Options Plan and continuation of the £1m Annual Investment Allowance will also still go ahead.
Emma Jones, founder of Enterprise Nation, said:
"While today's statement was all about calming the markets, what was absent was a signal that the government is backing small businesses and their growth plans.
"After the previous chancellor announced his mini-Budget, we issued a statement to say that support for enterprise in politics was back. In addition to the now scrapped tax cuts, there were repeated references to how the government wanted to support enterprise in helping people become their own boss and to keep growing.
"Almost all of the fiscal measures may have been reversed today but we hope the appetite to support and celebrate enterprise has not."