Mini-Budget reversed as government looks for ‘stability’

Published by Daniel Grainge on 17 October 2022

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In an unprecedented move, the new Chancellor of the Exchequer, Jeremy Hunt, has reversed almost every aspect of the new government’s Mini-Budget announced just a few weeks ago.

The move follows widespread criticism and turmoil on the money markets that has seen the cost of government borrowing soar. The government hopes that its reversal of its Mini-Budget will ‘give certainty about public finances’ before a full fiscal plan is announced at the end of October.

Daniel Grainge, Partner and Head of Tax, said: “The Mini-Budget led to a period of instability on the financial markets and increased costs of borrowing for both the government and households.  The lack of a report from the Office of Budget Responsibility (OBR), providing an independent assessment of the government’s tax and spending plan, appears to have been a key factor in the response of markets.

“It is hoped that these latest changes, which to a large part reverse the announcements made in the Mini-Budget, will provide some reassurance to the markets and that the fiscal statement scheduled for 31 October will include a report from the OBR showing how the government can afford to pay for public services without borrowing increasing to unsustainable levels.

“We would call on the government to think hard before making its fiscal statement at the end of the month and focus on those measures that are important to businesses and families, and provides a period of certainty and stability, allowing individuals and businesses to make decisions for the future.”

What stays and what is reversed?

Announced on 23 September 2022 Staying Reversed
Basic rate of income tax reduced to 19% Reversed indefinitely
45% top rate of income tax abolished Reversed
Reduction in dividend tax rates Reversed
Abolition of off-payroll working rules Reversed
Scrapped increase in Corporation Tax to 25% Reversed
Alcohol duty freeze Reversed
VAT-free shopping Reversed
Stamp Duty Land Tax reduction Staying
National Insurance 1.25% increase reversal Staying
Energy price cap Staying – but only guaranteed until April 2023 instead of September 2024

Based on the limited information available at the time of writing, it appears that plans to create new tax incentivised Investment Zones, allow pension funds to invest in smaller, higher risk businesses, and to make the £1m Annual Investment Allowance permanent, will remain.

If you would like to discuss the topics explored in this article, or need help digesting all these changes, then please contact us.

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