New Chancellor, Jeremy Hunt, has reversed most of the announcements made in late September.
Mini Budget Decisions To Be Reversed:
This unprecedented action means there will be:
- No reduction in corporation tax (the 25% threshold has been reinstated).
- No 1p cut in the rate of basic income tax, now remaining at 20% (this was due to be introduced in April 2023).
- No two-year energy price guarantee (now running until April 2023).
- No reduction in ordinary and upper dividend tax rates (planned as a 1.25% reduction).
- No repeal of 2017 and 2021 IR35 rules (applying to off-payroll workers).
Other changes include:
- No abolition of the 45% income tax rate (applicable for people earning more than £150,000 per year).
- No new VAT-free shopping scheme for overseas visitors.
- No freeze on alcohol duty rates.
Mr Hunt’s statement on 17 October 2022 declared the reversal of the proposed £45bn of unfunded tax cuts to a new total of £32bn. These drastic steps are intended to stabilise the markets after the recent volatility that followed the original mini budget announcements. This affects “almost all” the tax measures announced in the growth plan that have not yet started parliamentary legislation.
The Chancellor said: “The government has today decided to make further changes to the mini-budget and to reduce the unhelpful speculation about what they are, we’ve decided to announce these ahead of the medium-term fiscal plan, which happens in two weeks.”
“No government can control markets but governments can give certainty about the sustainability of fiscal plans… we will reverse almost all the tax measures in the growth plan.”
Whilst these changes have created confusion and disappointment for many, the markets have responded positively. The pound has strengthened and planned government borrowing has fallen.
What Mini Budget Items Are Staying?
- National Insurance to drop by 1.25% from 6 November 2022
- No Stamp Duty payable on the first £250,000 of a property’s value (£425,000 value for first-time buyers)
Martin McTague, national chair of the Federation of Small Businesses (FSB), said: “The Chancellor is right to highlight the need for stability, following all of the political turmoil and chopping and changing which has made it virtually impossible for businesses to plan and make investment decisions.
“Small businesses want to be growing and investing, but will need economic conditions to improve and sky-high operating costs brought down in order for them to be front and centre of future economic recovery.”
How do the recent changes affect you?
Is your business impacted by the Chancellor’s announcement?
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