Chancellor announces further u-turns on Mini Budget
The new Chancellor has certainly had a busy few days. Following his first U-turn announcement on Friday in relation to Corporation Tax, today brought an emergency statement on the Mini Budget in an attempt to reassure financial markets.
Today, the Chancellor announced an almost complete reversal of the policies unveiled as part of the original Mini Budget on 23 September:
- The plan to reduce the basic rate of Income Tax to 19% from April 2023 has been scrapped. The rate will remain at 20% indefinitely
- The plan to cut the dividend tax rate has been scrapped. The highest rate of dividend tax will remain at 39.25%. This is interesting as the dividend rate had been increased to mirror the increase in National Insurance rates; however, the National Insurance increase reversal is one of the few measures to remain in place
- The new VAT-free shopping scheme for non-UK visitors will no longer be introduced
- The IR35 rules on off payroll working will now remain in place
- Although not part of the Mini Budget, the Chancellor has also scaled back the government’s Energy Price Guarantee. This was due to support households and businesses with their energy bills for two years, but will now expire in April 2023, with a Treasury-led review to determine what happens beyond that.
Of the major announcements made in the original Mini Budget, only the reversal of the rise in National Insurance and the increase in the threshold for Stamp Duty Land Tax have not been scrapped.
With further announcements scheduled from the Chancellor in a fortnight – including an update from the Office of Budget Responsibility about the size of the budget deficit as well as some spending cuts – it seems unlikely that market speculation about more fiscal changes will die down any time soon.