The new Chancellor Jeremy Hunt has reversed most of his predecessor’s tax plans, including many that would have benefited businesses.
Mr Hunt replaced Kwasi Kwarteng after weeks of market turmoil, following the former Chancellor’s now infamous mini budget.
The September mini budget included ‘pro growth’ changes for corporation tax, income tax, and off-payroll working (IR35) rules for self-employed workers. But in a statement to MPs on Monday, the former health and foreign secretary took a butcher’s knife to most of these proposals.
Some of the announcements included:
- Corporation tax will increase from 19% to 25% in April 2023, as planned by Rishi Sunak
- The 45p income tax rate will remain in place for top earners
- The basic rate of income tax will remain at 20%, instead of being cut to 19%
- The basic rate of dividend tax will increase to 8.75%, instead of being frozen at 7.5%
- Contractors’ IR35 status will still be judged by clients, rather than by contractors themselves
- The rate of alcohol duty will not be frozen
- VAT will still apply to goods bought by non-UK visitors
The new Chancellor also said he would scale back the government’s energy support package for households.
Liz Truss originally promised to cap typical gas and electric bills at £2,500 for two years. However, this price guarantee will now end in April 2023, so only this winter will be covered.
What happens from April will depend on the outcome of a Treasury review, but Mr Hunt said it was important to save taxpayers money.
Business customers were also promised energy bill help, with wholesale energy prices capped for firms and organisations for six months from 1 October 2022. Jeremy Hunt indicated that any support after these six months would be targeted at organisations that need it most.
Miles Grady, Director at CloudAccountant.co.uk said:
“By ripping up most of the September mini-budget, Jeremy Hunt has brought stability to the marketplace, which is crucial for businesses to plan and make decisions.
Small businesses will welcome the new Chancellor’s decision not to increase National Insurance Contributions and the fact that he’s not rolled back on small business energy support this winter. However, I think that most business owners would encourage him to reconsider some of his proposals, including those on IR35 and dividends.”
Only two of Kwasi Kwarteng’s major tax announcements appear to have survived Hunt’s mini-budget bonfire. First, National Insurance Contributions will not rise by 1.25 percentage points, as originally planned by the Government lead by Boris Johnson and Rishi Sunak. Kwarteng’s only other surviving policy means that Stamp Duty will not be paid on the first £250,000 of a property’s value, up from £125,000 originally.
Jeremy Hunt also kept some of Kwarteng’s other pro-growth plans, including the creation of new low-tax investment zones and plans to relax some planning regulations, as well as scrapping a cap on bankers’ bonuses.
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