Budget update: New Chancellor reverses previous cuts17/10/2022
Given the current state of British politics, you might be forgiven for thinking “another week, another budget”. However, it is important to avoid fatigue setting in and pay attention to these updates, as the government’s economic policy will affect your tax obligations and personal and professional finances.
In an emergency announcement on Monday, new chancellor Jeremy Hunt said he is scrapping practically all of his predecessor’s, Kwasi Kwarteng’s, mini-budget. This includes the anticipated income tax cut, as he put out plans for billions of pounds in savings to stabilise the public finances. Mr Hunt stated that his tax reduction reversals will raise approximately £32 billion per year as part of measures to restore the public finances following the market and mortgage turbulence caused by the announcement of Mr Kwarteng’s mini-budget.
In summary, Mr Hunt’s mini-budget highlights:
- Stamp duty cuts are still planned, as is the government’s reversal of the 1.25% increase in national insurance contributions
- Household energy bill assistance will end in April, with a study to identify a “new strategy” that will “cost the taxpayer much less”
- The base rate of income tax will stay at 20% for the foreseeable future
- Income tax cuts have been scrapped
- The repeal of the health and social care levy remains
- The removal of the cap on banker bonuses remains
Setting out a vision of the country’s finances that, he hopes, will stabilise markets, Mr. Hunt walked back Prime Minister Liz Truss’s promise to “absolutely” not cut public services. He said:
“All departments will need to redouble their efforts to find savings and some areas of spending will need to be cut. But as I promised at the weekend, our priority in making the difficult decisions that lie ahead will always be the most vulnerable and I remain extremely confident about the UK’s long-term economic prospects as we deliver our mission to go for growth.”
He also reversed the Prime Minister’s first major policy announcement when he stated that the energy price guarantee would only run until April 2023. He said: “This is a landmark policy supporting millions of people through a difficult winter and today I want to confirm that the support we are providing between now and April next year will not change. But beyond that, the prime minister and I have agreed it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices.”
He continued to highlight the differences between his own approach and that of his predecessor, saying: “We will reverse almost all the tax measures announced in the growth plan three weeks ago that have not started parliamentary legislation. So whilst we will continue with the abolition of the health and social care levy and stamp duty changes, we will no longer be proceeding with the cuts to dividend tax rates, the reversal of off-payroll working reforms introduced in 2017 and 2021, the new VAT-free shopping scheme for non-UK visitors or the freeze on alcohol duty rates.”
The pound strengthened and UK government bonds rallied on the back of Mr. Hunt’s announcement, indicating that he had achieved his objective of returning stability to markets.
If you are struggling to keep up to date with the government’s fiscal policy, and are unsure of your tax obligations, or whether you are making the most of any support available to you and your business, call JW Hinks on 0121 456 0190. Our experienced team of experts can ensure you fulfil your obligations while placing yourself in as financially beneficial a position as possible.