Three weeks, two Chancellors and an almost complete reversal of the “Growth Plan”

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No one could have predicted when Kwasi Kwarteng stood up in parliament to make his first fiscal statement that 3 weeks later the vast majority of his announcements would be reversed, or indeed that his first (mini) budget would be his last.

£32bn of the proposed £45bn tax cuts were today withdrawn by the new Chancellor, Jeremy Hunt, and the mood has swung to a much more austere tone in an attempt to reassure the markets, and the public, following 24 days of economic turmoil.

The Chancellor will provide full details of his “Medium Term Plan” on 31^st October, however today he revoked most of his predecessor’s proposed changes.

So, what has changed?

Income Tax – Following the decision to retain the 45% tax bracket for high earners it has also been announced that the reduction in the basic rate of income tax from 20% to 19% is to be suspended until “economic conditions allow for it”.

Dividends Tax – The previous plan to cut dividends tax by 1.25% from April 2023 has been reversed and the increase in dividend tax rates will go ahead despite the fact the Health and Social Care Levy has been cancelled.

Energy Bills Support – Possibly the biggest announcement today was the change to plans to provide support with energy bills. The government had previously announced that household energy bills would be subject to a price cap guaranteed for two years, this will now remain in place until April 2023 and instead, a treasury review was announced to find other ways to support households and businesses with energy charges and supply beyond that date.

IR35 Reforms – Plan to repeal the 2017 and 2021 reforms to off-payroll working rules has now been revoked and reforms will remain in place.

VAT-Free Shopping – Decision to introduce VAT-free shopping for overseas visitors to the UK repealed.

Alcohol Duty – Plans to freeze alcohol duty from 1^st February 2023 are no longer going ahead.

Corporation Tax – As already announced Corporation Tax will increase from 19% to 25% from April 2023.

What has remained from the “Mini Budget”?

National Insurance – The reversal of the National Insurance increase and the Social Care Levy will go ahead as planned.

Stamp Duty Land Tax – The decision not to charge duty on the first £250,000 of a property’s value (£425,000 for first-time buyers) will stand.

Capital allowances – The £1 million Annual Investment Allowance will continue.

The Chancellor made it clear that this statement covered just some of the changes planned, indeed warning that there are more difficult tax decisions to come.

We await full details and importantly costings to be set out in the Medium-Term Fiscal Plan on 31^st October when our tax team will provide reaction and analysis, and explain what this might mean for you and your business.