In a statement made at the Treasury today (17 October), the newly appointed chancellor Jeremy Hunt has announced that he is reversing almost all the mini-budget tax measures made by previous chancellor Kwasi Kwarteng last month.
He confirmed that the following tax policies will no longer be taken forward:
- Cutting the basic rate of income tax to 19% from April 2023. While the government aims to proceed with the cut in due course, this will only take place when economic conditions allow for it and a change is affordable. The basic rate of income tax will therefore remain at 20% indefinitely. This is worth around £6 billion a year.
- Cutting dividends tax by 1.25 percentage points from April 2023. The 1.25 percentage points increase, which took effect in April 2022, will now remain in place. This is valued at around £1 billion a year.
- Repealing the 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) from April 2023. The reforms will now remain in place. This will cut the cost of the government’s Growth Plan by around £2 billion a year.
- Introducing a new VAT-free shopping scheme for non-UK visitors to Great Britain. Not proceeding with this scheme is worth around £2 billion a year
- Freezing alcohol duty rates from 1 February 2023 for a year. Not proceeding with the freeze is worth approximately £600 million a year. The next steps of the Alcohol Duty Review announced in Growth Plan 2022 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.
- The energy price guarantee will no longer last for two years. Instead, it will last until April 2023. As part of this alteration, Mr Hunt also revealed a Treasury-led review which will be launched to consider how to support households and businesses with energy bills after April 2023. He said that 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, adding that any support for businesses will be targeted to those most affected, and that the new approach will better incentivise energy efficiency.
The government’s reversal of the National Insurance increase and the Health and Social Care Levy, and the cuts to Stamp Duty Land Tax, will however remain. The £1 million Annual Investment Allowance, the Seed Enterprise Investment Scheme and the Company Share Options Plan will also continue as a measure to support business investment.
The announcement comes ahead of the medium term fiscal plan which is set to be announced in two weeks.
Table of total benefit of tax policy reversals:
Source: Gov.UK
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