Following the Mini-Budget announced in September, there have been lots of changes. For starters, the then Chancellor Kwasi Kwarteng has been sacked. He got it wrong and his announcement resulted in a meltdown in the market. It led to a sharp decline in the value of the pound, interest rates raised sharply and overall confidence in the UK economy hit a new time low. Many mortgage companies pulled mortgages and the cost of borrowing increased significantly, impacting millions of people across the UK.
What Were The Original Tax Cuts?
We summarised the main points in our most recent blog. You can see full details here. In summary: –
- The planned increase in Corporation Tax was canceled.
- Basic rate of income tax to be reduced to 19% and an additional 45% rate scrapped in April 2023.
- Stamp Duty nil rate band increased to £250,000. No Stamp Duty for first-time buyers on properties up to £450,000.
- Alcohol Duty to remain the same.
- Health & Social Care Levy scrapped.
- Annual Investment Allowance is to remain.
- Increase in rate of dividend income tax to be canceled.
- Pension Tax Relief to be 20%
- Energy Bill Relief Scheme.
Which Tax Cuts Have Been Reversed?
New Chancellor Jeremy Hunt has reversed £32 billion of tax cuts that were announced in September. He has done this to stabilise the financial markets. The announcements in September have quite frankly been a disaster on the economy. There are calls for Prime Minister Liz Truss to resign. Many experts believe ‘the Truss programme for government is dead.’ The fact the new Chancellor has torn apart her economic strategy says it all.
The following tax cuts have been scrapped: –
- Cancellation of increase in Corporate Tax has been scrapped. This will raise £18.7 billion.
- VAT-free shopping for international tourists. This will raise £2.1 billion.
- Freeze on Alcohol Duty. This will raise £0.6 billion.
- All changes announced to Income Tax scrapped. Additionally, penny cut in Income Tax expected in April will not happen. This will raise £5.9 billion.
- Cuts to dividend tax rates. This will raise £0.9 billion.
- The Energy Price Cap of £2,500 will be scaled back.
The following cuts remain: –
- Stamp Duty Changes which are expected to cost £2.1 billion a year.
- Reversal of the National Insurance rise, costing around £18.7 billion a year.
- Removing a cap on bankers’ bonuses.
What Additional Cuts Were Announced?
Jeremy Hunt’s main aim as Chancellor is to restore confidence in the financial markets. A key area to address is the increased cost of borrowing as a knock-on impact of increasing interest rates. He has announced there will be large cuts in public spending. This is something Liz Truss said last week would not happen.
Hunt has warned of difficult decisions ahead. He will focus on whether state pensions and benefits will increase in line with high inflation rates. He will also look at public-sector pay and spending. There is a large black hole in the UK economy which needs addressing urgently. Furthermore, virtually household in the UK is feeling the pinch. The cost of living crisis in the UK continues to get worse. It is imperative the UK Government acts now to undo some of the damage caused by the September announcements.
If you would like advice on your tax affairs please contact us on 0800 471 4546.
