The New Chancellor has announced the reversal of many changes from his predecessor’s mini-budged.
Jeremy Hunt has moved to reverse many of the changes previously announced by Kwasi Kwarteng. The Chancellor will have his own mini-budget on 31 October supported by the medium term economic plan and an OBR report.
Reversal of previously announced tax reductions
The Prime Minister and the former chancellor had already announced that the additional rate of Income Tax at 45% for those with income over £150,000 will remain and that proposed Corporation Tax increase to 25% from 19% for profits over £250,000 will be retained and apply from 1 April 2023.
Mr Hunt has announced that the basic rate of Income Tax will remain at 20% and not reduce to 19%. Although the Government is committed to reduce the basic rate of Income Tax to 19% they have not set any date by which the proposed reduction will be introduced.
The chancellor also confirmed that the proposed reduction in taxation on dividends will not be introduced and so the Income Tax rates on dividends will not change.
The proposed freeze in alcohol duties will also now not go ahead.
The existing rules on off-payroll working are to be retained with contractors still determining whether a sub-contractor is a sub-contractor or actually an employee for PAYE and NIC purposes.
Support for fuel bills
The Government has previously announced support for non-domestic organisations as prices are capped for 6 months from 1 October at 21.1p per KWh for electricity and 7.3p per KWh for gas and will be reflected in the fuel bills issued. It will apply to fixed contracts entered into after 1 April 2022 and to variable and flexible tariffs and contracts for the fuel used from 1 October 2022 to 31 March 2023. The Government states that this level is at half the anticipated wholesale fuel prices for this winter. However, the standing charge is not subject to any cap.
The support for home fuel bills will limit the average home’s fuel bill to £2,500 per annum for the next two years and the £400 discount off the energy bills will also apply from October.
The Chancellor has announced that a Treasury-led review will take place into how households and businesses are helped with energy bills from April next year. The previously announced support being provided from now until then will not change but beyond that date, there will have to be changes.
What remains from the mini-budget
The increase in National Insurance of 1.25% for employers and employees that applied from April this year was offset for some employees by the increase in the National Insurance thresholds from July. Mr Kwarteng had cancelled this increase for employees and employers from November and the proposed Health and Social Care Levy that was due to come in from April 2023 has been abolished. Mr Hunt has confirmed that these changes will go ahead. The changes will save an employee earning £30,000 per annum approximately £18 per month.
The Chancellor also confirmed that proposed Stamp Duty Land Tax on the acquisition of residential property by individuals will go ahead. So the point at which an individual pays Stamp Duty Land Tax has increased from £125,000 to £250,000 and for first time buyers the point at which they start paying Stamp Duty Land Tax has increased form £300,000 to £425,000 and applies on properties up to £625,000 and these changes will apply from today.
It was also confirmed that the Annual Investment Allowance that allows a business a 100% deduction on up to £1m of plant and machinery acquisitions will remain at £1,000,000 and this will be a permanent level, encouraging businesses to invest in new plant and machinery.
So now more of a mini-budget, but further announcements are expected to be made and there will be another mini-budget on 31 October.
If you have any questions on how the budget changes impact you then please contact your local partner on 0330 088 7111