It used to be that a week was a long time in politics. As recent events have shown, however, there is plenty that can happen in the space of just a few days.

On October 17, a mere 72 hours after replacing Kwasi Kwarteng as Chancellor of the Exchequer, Jeremy Hunt made a statement in the House of Commons that outlined a raft of significant changes to the fiscal policies introduced by his predecessor. The speech reversed many of the marquee announcements from the Growth Plan – known as the mini-Budget – which had been delivered to the House less than a month earlier.

Chancellor Hunt said the series of dramatic U-turns was made “to ensure there is trust and confidence in our national finances” in the face of negative reaction to the mini-Budget from global markets.

Vintage previously provided a summary of the key announcements from the mini-Budget, and here we clarify the changes that have since been confirmed by Chancellor Hunt.

Income tax

The basic rate of Income Tax had been earmarked to fall from 20% to 19% from April 2023. This measure has now been scrapped. Furthermore, there is no indication that the rate will fall at any point in the future, with the new Chancellor underlining that the public finances cannot justify “a permanent, discretionary increase in borrowing worth £6 billion a year”.

Originally, the mini-Budget had also advocated the scrapping of the 45% additional rate of income tax. However, protests against this measure and how it would be funded meant that this move had already been cancelled during the previous Chancellor’s brief tenure. As it stands, therefore, the 45% additional rate remains payable by anyone earning above £150,000.

Corporation Tax

Prior to the mini-Budget, the rate of Corporation Tax was scheduled to be increased from April 2023. This plan was scrapped in the mini-Budget, only for the decision to be subsequently reversed by Chancellor Hunt. As such, Corporation Tax is now expected to rise from 19% to 25% in April 2023, as per the original, pre-mini-Budget schedule.

Other policies being reversed or cancelled:

• Energy: The price guarantee that caps energy rates will now only be in place for six months rather than the previously promised two years.
• Dividends: The mini-Budget set out cuts in dividend tax rates, but these will no longer go ahead.
• Off-payroll working: Plans to reverse rule changes for off-payroll workers (IR35) have themselves been reversed.
• There will no longer be a freeze in alcohol duty rates.
• Plans for VAT-free shopping for non-UK visitors have been scrapped.

WHICH POLICIES HAVEN’T BEEN REVERSED?

• National Insurance: Former Prime Minister Boris Johnson had rubberstamped plans for a Health and Social Care Levy, due to be introduced in November 2022. This was effectively funded through a 1.25% increase in National Insurance contributions that was instituted in April 2022. However, the mini-Budget had scrapped these plans and Chancellor Hunt confirmed the government will indeed continue with the abolition of this policy. As it stands, this will result in a 1.25% decrease in NI contributions from November.
• Changes to Stamp Duty remain in place. As a reminder, these were an increase to the nil-rate band from £125,000 to £250,000, a raising of the nil-rate purchase-price limit from £300,000 to £425,000 for first-time buyers, and a hike of the maximum property value on which first-time buyer’s relief can be claimed from £500,000 to £625,000.
• The Annual Investment Allowance, a form of tax relief that supports the purchase of equipment by businesses, will stay at the increased rate of £1 million per tax year.

Summary

When it was initially revealed, the mini-Budget triggered many raised eyebrows with the breadth of tax cuts it set out. Ultimately, however, it has led to the government having to make “decisions of eye-watering difficulty” in an attempt to bring the stability necessary for the economy to flourish in the future.

While it remains to be seen whether all those U-turns will leave the UK’s economy pointing in the right direction, setting a clear target for long-term growth is a very welcome ambition at a time defined by such extensive short-term change.

The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Wealth Management or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.