New Chancellor Reverses Tax Cuts and Scales Back Energy Help

New Chancellor Jeremy Hunt has today ditched almost all of PM Liz Truss’s tax cuts announced in the government’s mini-budget three weeks ago. Further to reversing the previously-announced freeze on Corporation Tax:

  • The basic rate of income tax will remain at 20p indefinitely – instead of being reduced to 19p from April 2023
  • The corporation tax rate for large companies will increase to 25% from April 2023, as originally planned
  • The cap on energy prices charged to households is now only guaranteed until April next year, but will then be reviewed
  • The freezing of Alcohol Duty has been scrapped
  • Tax free shopping for non-UK visitors has been scrapped

Other key points announced include:

  • On dividends, each income tax rate band will retain the extra 1.25 percentage points added from April 2022, which were scheduled to be withdrawn from April 2023
  • On off-payroll working, the reforms introduced in 2017 and 2021 will now not be repealed. Companies will remain responsible for determining the employment status of workers working through an intermediary

Some tax cuts have however remained including:

  • The 1.25% increase to the rates of national insurance, which has applied since April 2022, will still be reversed; currently planned from 6 November
  • The increased nil rate threshold of £250,000 for stamp duty land tax (SDLT) will be kept
  • The annual investment allowance (AIA) will remain at its increased level of £1 million per year indefinitely

The Chancellor’s medium-term fiscal plan is scheduled for 31 October. It will be released alongside forecasts from the Office for Budget Responsibility, so we may see further tax announcements then.

Hunt says his announcement is designed to calm financial turmoil following the mini-budget. Exchange rates and markets have initially reacted positively. Where it all leaves the PM remains to be seen.