The Government’s merry-go-round of tax and policy changes will be making your head spin.

Earlier this week, the new Chancellor Jeremy Hunt shredded September’s mini-budget, reversing most of the tax measures.

In total, the Government estimates the reversals will raise around £32 billion a year. It said the changes aimed to “ensure the UK’s economic stability and provide confidence in the Government’s commitment to fiscal discipline”.

The Chancellor will publish the Government’s fiscal rules alongside an Office for Budget Responsibility forecast, and further measures, on 31 October.

Here, we give an overview of what’s being scrapped from last month’s Growth Plan and what’s staying, and share our reaction to the news.

Which mini-budget measures are being reversed?

The cut to the basic rate of income tax

Mr Hunt’s predecessor, Kwasi Kwarteng, announced last month the basic rate of income tax would be cut by 1p, taking it down to 19% from April 2023 (a year earlier than planned). But the new Chancellor has reversed this measure, saying the basic rate will stay at 20% indefinitely.

The cut to the higher rate of income tax

The Growth Plan measure to abolish the 45p top rate of income tax had already been ditched just 10 days after the mini-budget. That means people earning more than £150,000 a year will continue to pay the 45% higher rate.

Dividends tax reforms

The 1.25 percentage points increase in dividends tax, which took effect in April 2022, will now remain in place.

Cancellation of corporation tax rise

The Growth Plan included the cancellation of the planned rise in corporation tax. But Prime Minister Liz Truss later abandoned this measure. That means the tax will go up from 19% to 25% in April 2023.

Repeal of IR35 tax reforms

The 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will remain in place, instead of being repealed. So, workers providing their services via an intermediary won’t regain responsibility for determining their employment status and paying the appropriate amount of tax and National Insurance.

The freeze on alcohol duty rates

The Government has abandoned its one-year freeze on alcohol duty rates, which was due to take effect from 1 February 2023.

VAT-free shopping

The plan to introduce a new VAT-free shopping scheme for non-UK visitors to Great Britain has been cancelled.

What’s staying from the mini-budget?

Reversal of National Insurance increase

The reversal of both the National Insurance increase and the Health and Social Care Levy are remaining.

Cuts to Stamp Duty

The cuts to Stamp Duty Land Tax (SDLT) will stay. That means the nil rate band of SDLT doubles from £125,000 to £250,000. First-time buyers, meanwhile, will pay no stamp duty up to £425,000, and the value of the property on which they can claim the relief increases from £500,000 to £625,000.

Investment allowance

The Annual Investment Allowance remains at £1 million.

(Note: some of the measures in this article are different for Scotland, Wales or Northern Ireland.)

What else has the Government announced?

The Energy Price Guarantee had originally been put in place for two years, but it will now only last six months.

A review will be launched to consider how to support households and businesses with energy bills after April 2023.

Spending cuts

The Chancellor said there would be more difficult decisions to take on both tax and spending. Government departments will be asked to find efficiencies within their budgets.

Our reaction to the mini-budget reversals

It’s been a turbulent few weeks in the world of tax and politics. The UK never has the most stable of taxation systems and things are constantly changing. But it’s past a joke when one day we have one set of tax changes, the next day the Government reverses a change, and then reverses the reversal!

UK businesses and UK taxpayers need certainty. How can anyone plan for the future when we don’t even know what the next day will bring?

If you need help understanding your taxes or would like the support of a professional tax adviser, chat to our team today. We have many years’ experience helping people and businesses in the West Midlands and across the UK to manage their tax payments.

Call us on 07813 434195 or email: stephanie.churchill@churchilltaxation.co.uk
Steph Churchill

Stephanie Churchill

Managing director & co-owner of Churchill Taxation