News & Insight
The ‘Un-Budget’: an almost complete reversal of the 2022 September ‘Mini Budget’
Following the Government’s second U-turn on 14 October 2022 (on the rate of corporation tax) and the appointment of Jeremy Hunt as new Chancellor (on which we reported here), the next fiscal event was expected for 31 October 2022 when the OBR forecasts are scheduled to be published. However, Monday 17 October 2022 started with the news of an emergency statement by the new Chancellor which confirmed an almost complete reversal of the principal measures announced at the recent 2022 September ‘Mini Budget’.
Given its nature, today’s statement has been termed an ‘Un-Budget’ by some, and it is perhaps worth starting this brief report with principal tax measures that have NOT been scrapped.
Principal tax measures previously announced by Kwasi Kwarteng that (as of today) will still be going ahead are the following:
- The reversal of the 1.25 per cent increase in rates of National Insurance contributions (which workers and employers have been paying since April 2022). This measure will take effect from 6 November 2022 as planned.
- The cancellation of the new Health and Social Care Levy (previously scheduled to take effect from April 2023).
- The additional reliefs from stamp duty land tax, including for first-time buyers, announced at the September ‘Mini Budget’.
- Tax reliefs applicable to investment zones.
Further details of these measures can be found here.
The list of measures that have been reversed (including the two previous U-turns) is rather longer, with the main points being the following:
- The 45 per cent top rate of income tax will remain in place (as per the U-turn on 3 October). Note this measure does not apply in Scotland where Scottish income tax rates apply instead.
- The proposed reduction of the basic rate of income tax from 20 per cent to 19 per cent from April 2023 has been scrapped for the time being. It will not be introduced in April 2024 either (as originally announced by Rishi Sunak), but instead remain at 20 per cent indefinitely (“until economic conditions allow for a change”). Again, this measure does not apply in Scotland.
- The 1.25 per cent increase in the rates of income tax charged on dividends, which took effect in April 2022, will not be reversed, but remain in place.
- The increase of the main rate of corporation tax from 19 per cent to 25 per cent will take effect from April 2023, as originally announced by Rishi Sunak (see here for further details).
- The repeal of the IR35 reforms of 2017 and 2021 (previously scheduled for April 2023) has been cancelled.
- Accordingly, the current off-payroll working rules will remain in place, where (subject to some exceptions) responsibility for compliance rests with the end client (or another UK resident person in the chain who processes payments to the personal services company through which the individual worker provides the relevant services to the end client).
Other measures that have been cancelled
- VAT-free shopping for overseas visitors.
- A freeze on alcohol duties. More details on this measure are expected to be made available at the fiscal statement expected for 31 October 2022.
In addition to the tax measures, the energy price guarantee will now only remain in place until April 2023 (rather than for two years). The Treasury will carry out a review to determine what should be done from April 2023 to protect the most vulnerable.
It has been reported that the combined effect of the reversed measures is an estimated saving of £32 billion.
The markets’ initial response to today’s announcements has been positive, but whether confidence has sufficiently been restored for a longer period of calm remains to be seen. We still have the OBR forecasts to come (with publication being scheduled for 31 October 2022), presumably with information on how any remaining funding gap will be closed.
Prior to today’s announcement there had been rumours about an estimated £70 billion black hole in public finances, and Jeremy Hunt ended his short speech with a warning of further difficult choices ahead. He repeated that message in his address to the House of Commons in the afternoon and emphasised again that “nothing was off the table”. All that seems certain at the moment is that there is more to come.
All the comments above were written and researched by Annette Beresford.
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