The new Chancellor reverses tax cuts in mini-budget
Yesterday, the new Chancellor Jeremy Hunt has scrapped nearly all tax cuts announced in last month’s mini-budget, which include removing a proposed cut to corporation tax and a deferred 1p cut to income tax and is scaling back support for energy bills.
The markets have experienced considerable volatility as a result of the ‘Growth Plan’ delivered by the former Chancellor, Kwasi Kwarteng on 23 September 2022.
That made regaining economic confidence an urgent task for the newly appointed Chancellor who has delivered a reversal of many of the key tax measures announced in the mini-Budget in a new fiscal statement.
The only big measures to survive were changes to Stamp Duty Land Tax (SDLT) thresholds and the cut to National Insurance due on 6 November 2022.
The changes include no cuts to dividend tax rates, a repeal of IR35 reforms for off-payroll working rules introduced in 2017 and 2021, no new VAT-free shopping scheme for overseas visitors, and no freeze on alcohol duty rates.
He also announced the basic rate of income tax to remain at 20%, rather than being reduced to 19% from April 2023.
The government had already abandoned plans to scrap the 45p rate of income tax for top earners and had U-turned on a promise not to increase corporation tax.
In addition, the energy price guarantee will only extend until April 2023, not for two years as originally planned.
The Chancellor’s new announcements at a glance:
Changed:
Income Tax
As previously announced, the Additional rate of Income Tax will remain in effect.
The Chancellor has now also cancelled the one penny-in-a-pound cut to the Basic rate, which was brought forward by Kwasi Kwarteng from April 2024 to April 2023. It will now remain at 20 % indefinitely.
Dividend Tax
The 1.25 percentage point increase that took effect from April 2022 will no longer be reversed from April 2023. This means the current rates of dividend tax will instead remain in effect.
Corporation Tax
As announced by the Prime Minister on Friday, Corporation Tax will not remain at 19 per cent for all companies and instead will be levied at 25 per cent for those with profits of more than £250,000 from April 2023.
Those with profits below £50,000 will continue to pay at 19 per cent, while marginal relief will be available to those with profits between £50,000 and £250,000.
Energy Price Guarantee
The Energy Price Guarantee for households will remain in effect until April 2023, rather than for two years as originally announced. The Energy Bill Relief Scheme for businesses will also be reviewed before April 2023.
The Chancellor said, HM Treasury will review these policies with a view to reducing the cost of the measure and making business support more targeted.
IR35/Off-payroll Working Rules
The planned reversal of the 2017 and 2021 reforms to the IR35/Off-payroll Working Rules in the public and private sectors from April 2023 will now not take place.
It will remain for employers to determine whether a contractor falls within the scope of the rules and should be taxed similarly to an employee.
Alcohol Duty
The planned freeze in Alcohol Duty rates from 1 February 2023 has been cancelled.
Unchanged:
National Insurance/ Social Care Levy
The cancellation of the increase in National Insurance from 6 November 2022 and the Social Care Levy that was to have been introduced from April 2023 remains in effect.
Stamp Duty Land Tax (SDLT)
The changes to the Stamp Duty Land Tax (SDLT) thresholds that took effect immediately after the mini-Budget remain in place and will not be cancelled.
Annual Investment Allowance
This tax relief on plant and machinery will be permanently retained at £1 million, as outlined in the mini-Budget.
Tax-advantageous investment schemes
The Seed Enterprise Investment Scheme and the Company Share Options Plan will also continue to further support business investment having been expanded upon in the mini-Budget.
Bankers' bonuses
The plan to remove the cap on bankers' bonuses is another of the mini-budget policies to survive.
This guidance is for general information only and does not substitute specific advice. You should not rely on it as specific advice and Peria & Co cannot accept any liability for its contents. The Chancellor’s announcements may have significant tax planning implications. If you need advice please contact us at info@peria.co.uk or call us on +44 (0)1932 849023.
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