The new Chancellor of the Exchequer has announced an emergency statement to combat the recent market uncertainty.
Jeremy Hunt was made Chancellor of the Exchequer last Friday (14th October 2022), after a turbulent few weeks for Kwasi Kwarteng since Mr Kwartweng and Prime Minister Lizz Truss’ Mini-Budget.
Mr Hunts’ new emergency statement has been brought forward from the 31st of October with the hope of calming the financial markets and easing interest rates.
“Not taking anything off the table” said Mr Hunt about Mr Kwartengs’ previous mini-budget that was announced earlier on in October. Hinting at major changes and more U-turns on previous policy.
Key Takeaways:
- ❌ Corporation tax rise has been scrapped
- ❌ Removal of the 45% rate for high-end earners scrapped*
- ❌ Cutting Income Tax basic rate by 1p scrapped
- ❌ Alcohol duty freeze scrapped
- ❌ Tax-free shopping for non-UK visitors Scrapped
- ✅ Reversal of national insurance 1.25% is staying
- ✅ Stamp duty changes are staying
- No Duty on the first £250,000 of property value
- First-time buyers pay no duty on the first £425,000
*Announced on October 3rd
Contact Aston Shaw today if you require any business advice following today’s announcements.
What did the emergency statement change?
In short, Almost all announcements from the October Mini-Budget have been scrapped.
However, the cut to national insurance and the stamp duty cut will remain.
Corporation Tax Increase
Originally set to rise from 19 to 25%, this has been scrapped.
Corporation tax will now remain at 19%
Income Tax Reduction
The basic rate of income tax will remain at 20p on the pound, in contrast to the previously announced cut, originally planned to be cut to 19p on the pound.
When Mr Kwarteng announced the income tax cut, the move was to save more tax based on the earnings of the individual, with someone earning £20,000 saving £93 and someone earning £100,000 saving £1,093.
Ahead of Mr Hunt appearing in the house of commons, Mr Hunt made a short announcement saying this planned reduction had been put on hold “indefinitely”. Meaning all potential savings in regards to income tax from the October Mini-Budget will stop, with the current rates of 20p on the pound continuing.
Energy Price Cap Timeline Change
In the October Mini-Budget, the energy price cap was announced which would have seen energy price caps frozen for 2 years at £2,500.
This timeline has now been reduced to 6 months.
After the 6 month period, actions going forward will be decided by an upcoming review from The Treasury.
Alcohol duty rates
The previous freeze on alcohol duty fees will no longer go ahead.
VAT Shopping
Overseas visitors were to see VAT Free shopping scheme when visiting the UK.
As of the emergency statement, this will no longer be the case.
Contact Aston Shaw today if you require any business advice following today’s announcements.
What remains from the Mini-Budget?
Not all policies have been scrapped, Some still remain.
Stamp-duty Changes
The stamp duty land tax will continue to be cut, with the limit raised to £250,000 or £450,000 for first-time buyers.
What this means:
- Stamp duty is the tax paid when you purchase a property
- The amount of stamp duty you pay depends on the price of the property
- Kwarteng says the move would take 200,000 people out of paying stamp duty
- This is a permanent change
National Insurance reversal
The reversal of the national insurance increase will continue to go ahead from November.
Previously announced, National insurance was to see a rise of 1.25% to help pay for health and social care, however, the previous Chancellor of the Exchequer, Mr Kwarteng, announced this would be reversed.
This will now remain the case after Mr Hunts’ emergency statement.
The Treasury has stated, “ The change will save 28 million people an average of £330 per year.”
However, this varies depending on what you earn.
IR35 Reforms – Off-payroll working
The reforms that will govern IR35, the laws regarding off-payroll working, will continue to be simplified.
