Just hours after his appointment, chancellor Jeremy Hunt announced on Friday afternoon that the government’s planned freeze on Corporation Tax was being reversed and that it would increase – as originally legislated – to 25% from April 2023.
Then at 11:15am yesterday (17th October), having been in office for just 72 hours, the Chancellor ripped up the Party’s recent (and poorly named) mini-Budget.
This very brief announcement was a prelude to his main address to Parliament later in the day, which was ‘apparently’ pre-agreed with the Speaker of the House of Commons in a bid to stem unhelpful speculation, as well as growing fears of a £72bn black hole in public finances and the potentially harsh reality of spending cuts.
Yesterday’s announcements reverse a number of the remaining headlines from the recent mini-Budget, and cover:
- The 1p cut to the basic rate of Income Tax has been scrapped indefinitely “until economic circumstances allow for it to be cut”. Mr Hunt said: “It is a deeply held Conservative value that I share that people should keep more of their money, but at a time when markets are rightly demanding commitments to sustainable public finances, it is not right to borrow to fund this tax cut…”
- The Energy Price Guarantee will now only remain in place until April 2023. The universal support was planned to last two years but will now be reviewed and further announcements made as to how it might be best applied.
- The anticipated cut in the tax rate on dividend income will also not happen from 6 April 2023
- VAT-free shopping for overseas visitors has been scrapped along with plans to freeze Alcohol duty rates for a year from 1 February 2023
- Plans to scrap the off-payroll working rules will also be abandoned, meaning the original reforms to IR35 still stand
In total, the reversal is expected to raise £32bn.
The only changes, however, to survive this radical U-turn are the reversal of the 1.25% National Insurance rate rise, which Chancellor Sunak introduced from 6 April 2022, and the increase to the Stamp Duty Land Tax threshold, which is already in place.
“The most important objective for our country right now is stability. Government’s cannot eliminate volatility markets, but they can play their part. We will do so because instability affects the prices of things in shops, the cost of mortgages and the value of pensions. There will be more difficult decisions,” said Mr Hunt.
We are told to still expect the Medium-Term Fiscal Plan on 31 October 2022, where the Chancellor is expected to announce further changes to fiscal policy before putting public finances on a sustainable footing.
Watch this space…
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