In what has been generally described as an unprecedented move in economic history, newly appointed Chancellor Jeremy Hunt has today (17th October 2022) axed almost all of the remaining tax measures announced in the 23rd September Mini Budget, following a recent series of other U-turns in relation to income tax (the reinstatement of the additional 45% rate) and the rate of corporation tax (see Weil’s coverage here).
Chancellor Hunt’s “emergency statement” has effectively gutted the Mini Budget announced by his predecessor, Kwasi Kwarteng, revoking measures including: decreases in the basic rate of income tax (which will now remain at 20% “indefinitely”) and rates of dividend tax; the reversal of changes to IR35 (off payroll working) rules; the VAT-free shopping scheme for non-UK visitors to Great Britain; and the freeze on alcohol duty. Notable exceptions to the latest “about face” include the scrapping of the 1.25% rise in the National Insurance contributions threshold (and related abolition of the Health & Social Care Levy) and changes to Stamp Duty Land Tax thresholds, each of which Chancellor Hunt has said will proceed as planned.
One of the criticisms of the Mini Budget was that it had not been accompanied by an economic forecast from the Office of Budget Responsibility (“OBR”), raising serious questions about how the government intended to fund the numerous tax cuts. Chancellor Hunt explained today that the emergency statement was intended to provide confidence and stability, and noted that the reversal of the specified Mini Budget measures is expected to raise £32 billion a year.
A new fiscal plan and OBR forecasts will be finalised on 31st October 2022.
UPDATED ON 27 OCTOBER: Since publication of this blog post, Rishi Sunak has replaced Liz Truss as Prime Minister, but Jeremy Hunt has been retained as Chancellor. The fiscal plan scheduled for 31 October 2022 will be upgraded to a full Autumn Statement and will now take place on 17 November 2022.