Jeremey Hunt, the latest chancellor of the exchequer, has announced plans to row back almost all of the tax measures announced by his predecessor Kwasi Kwarteng in his mini Budget.
In an emergency statement this morning, Hunt (pictured) who succeeded the sacked Kwarteng on Friday, revealed government will no longer proceed with many of the measures announced in September’s mini Budget.
This includes the cut of the basic rate of income tax to 19% from April 2023, leaving the basic rate of income tax at 20% indefinitely.
HM Treasury said this change is worth around £6bn a year from 2023-24.
The government added it aims to proceed with the cut in due course, but only when economic conditions allow for it and a change is affordable.
The cutting of dividends tax by 1.25 percentage points from April 2023 will also no longer proceed. The 1.25 percentage points increase, which took effect in April 2022, will now remain in place. This will increase tax revenue by £1bn a year.
The repeal of the 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) from April 2023 will also remain in place. This is valued at between £1bn and £2bn a year over the next five years.
The introduction of a new VAT-free shopping scheme for non-UK visitors to Great Britain will no longer proceed. This scheme will eventually be worth around £2bn a year.
Freezing alcohol duty rates from 1 February 2023 for a year will no longer proceed with the freeze is worth approximately £600 million a year. Government said the next steps of the Alcohol Duty Review announced in September will continue as planned. The alcohol duty uprating decision and interactions with the wider reforms to alcohol duties under the Alcohol Duty Review will be considered in due course.
This follows on from the previously announced decisions not to proceed with the proposals to remove the additional rate of income tax and to cancel the planned increase in the corporation tax rate.
The Treasury said that taken together, these measures will be worth around £20bn a year in 2023-24 rising to around £32bn in 2026-27.
Planned reversals of the National Insurance increase and the Health and Social Care Levy, and the cuts to Stamp Duty Land Tax are being retained as are the £1m Annual Investment Allowance, the Seed Enterprise Investment Scheme and the Company Share Options Plan to further support business investment.
Energy bills support review
While the Energy Price Guarantee and the Energy Bill Relief Scheme will continue to support households and business from now until April next year, beyond April, the prime minister and the chancellor agreed that it would be irresponsible for the government to continue exposing the public finances to unlimited volatility in international gas prices.
Consequently, a Treasury-led review will be launched to consider how to support households and businesses with energy bills after April 2023.
The review will aim to design a new approach that will cost the taxpayer significantly less than planned while ensuring enough support for those in need.
The chancellor also 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.
Hunt also revealed government departments will be asked to find efficiencies within their budgets. The new chancellor is also expected to announce further changes to fiscal policy on 31 October aimed at putting public finances on a sustainable footing.