On 23 September 2022, Kwasi Kwarteng presented his mini-budget. The negative market response to these planned changes, particularly major tax cuts, meant the government was compelled to revise many of these measures.
Three weeks later, Kwasi Kwarteng has been replaced by Jeremy Hunt. He intends to reverse almost all of his predecessor’s plans, hoping to make markets more stable. However, with Prime Minister Liz Truss’s resignation on 20 October it remains to be seen if he can achieve this, or if indeed he will still be in post to present his promised Autumn statement at the end of the month.
Read our summary on what changes have been made and what this might mean for your finances.
What’s changed since the mini-budget?
Initially: Mr Kwarteng wanted to scrap the 45% additional rate income tax band for those earning more than £150,000. After some outcry, this was reversed. Alongside this, the intention was to cut basic rate of income tax to 19% (currently at 20%) from April 2023.
Now: Mr Hunt has rejected all these measures, maintaining the original 45% and 20% bands as before. Consequently, your income tax rates will not change.
Initially: The rise in corporation tax that was due to increase from 19% to 25% in April 2023 was cancelled.
Now: In a U-turn, the government now plans to keep the proposed rate.
Initially: Energy bills were due to be frozen. This cap meant that a typical household would pay no more than £2,500 in energy bills for the next two years, from 1 October 2022. A one-off £400 fuel bill discount payment for households was also announced.
Now: The new Chancellor has now said that this support will only be guaranteed for six months, until April 2023. The method of support for households beyond this point is under review and will be announced at a later date.
Initially: Mr Kwarteng cancels increase in duties for alcohol products (beer, wine, cider, spirits). The duty paid on alcohol was previously re-valued each year in line with inflation; however, it was either cut or frozen in every budget since 2013.
Now: As part of revisions, Mr Hunt now intends to reverse this action increasing duty rates. It is estimated that this increase from February 2023 will be worth around £600m a year.
Initially: The IR35 rules, which govern off-payroll working, such as contractors was intended to be simplified, with the intention of removing the onus on companies to ensure that individuals are paying the right amount of tax.
Now: This change has been reversed and the current IR35 rules will remain in place.
What’s remained from the mini-budget?
National Insurance: The 1.25% rise in National Insurance was due to be reversed. Also, recently conceived plans for a Health and Social Care Levy, to provide funding for the NHS, were due to be scrapped. These changes have been continued by the new Chancellor. The 1.25% rise will still be cancelled on the 6th of November.
Stamp Duty: The stamp duty threshold was doubled from the first £125,000 of a property’s value to £250,000. First-time buyers will pay the tax on properties costing more than £425,000, with discounted stamp duty for first-time buyers applying up to £625,000.
Benefits: People who do not fulfil their job search commitments will face reduction in benefits in increased stringency of Universal Credit rules. Jobseekers over 50 will receive extra time with coaches to help them get back into work.