The new Chancellor of the Exchequer, Jeremy Hunt, was only appointed on Friday 14 October 2022. However, following another turbulent weekend, the Chancellor made not one but two important statements on 17 October 2022 about the future of the economy. The first, an emergency televised statement to the nation and the second, a statement to MPs in the House of Commons.
HM Treasury had prefaced these events with a short press release stating that the announcements followed the Prime Minister's statement on Friday, and further conversations between the Prime Minister and the Chancellor over the weekend, to ensure sustainable public finances underpin economic growth.
The Prime Minister’s statement on Friday had confirmed that the planned increase in Corporation Tax that was set to come into effect in April 2023 will now go ahead. This move represented a second major U-turn by the government following the mini-budget. The first U-turn being the announcement to scrap the proposed removal of the 45p personal tax rate from April 2023.
The Corporation Tax main rate will now increase from 19% to 25% on 1 April 2023 for companies with profits over £250,000. A Small Profits Rate (SPR) of 19% will apply for companies with profits of up to £50,000. There will also be a marginal rate of Corporation Tax for companies making profits of between £50,000 and £250,000 meaning an incremental rise in the Corporation Tax rate from 19% to 25% depending on how much profit a firm makes.
On Monday (17 October 2022), the Chancellor went even further and announced a reversal of almost all of the remaining tax measures set out in the Growth Plan (23 September 2022) by the previous Chancellor, Kwasi Kwarteng, that have not yet been legislated for in parliament.
In his emergency statement, the Chancellor confirmed that the following tax policies will no longer be taken forward:
- Cutting the basic rate of income tax to 19% from April 2023. This means that the basic rate of income tax will remain at 20%. The Chancellor said that any reduction in the basic rate will now only take place when economic conditions allow for it and a change is affordable.
- Cutting dividends tax by 1.25% from April 2023. This means that the 1.25% increase, which took effect in April 2022, will remain in place.
- The moves to simplify IR35 rules, including the repeal of the 2017 and 2021 reforms will not go ahead. The reforms will now remain in place.
- The planned introduction of a new VAT-free shopping scheme for non-UK visitors to Great Britain will not go ahead.
- Freezing alcohol duty rates from 1 February 2023 for a year. This will see the price of beer, cider, wine and spirits increase.
The changes are estimated to be worth around £32 billion a year.
It was also announced that the Energy Price Guarantee Scheme that came into effect on 1 October 2022 to help tackle the energy crisis and was set to remain in place for two years will now only be guaranteed until April 2023. There is also a parallel Energy Bill Relief Scheme to help cut energy bills for non-domestic energy customers, including UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals that was due to remain in place until 31 March 2023. HM Treasury has announced that a new review will be launched to consider how to support households and businesses with energy bills after April 2023.
The government has confirmed the move to reverse the 1.25% rise in National Insurance contributions (NICs) that came into effect at the start of the 2022-23 tax year on 6 April 2022 remains in place. This will see the reversal of the NIC increase from 6 November 2022 and will cover Class 1 (both employee and employer), Class 1A , Class 1B and Class 4 (self-employed) NICs. It was also confirmed that the ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 will not now go ahead as originally planned.
The increase in the Stamp Duty Land Tax (SDLT) nil rate band to £250,000 (from £125,000), effective since 23 September 2022 will also remain in place as will the increased SDLT bands payable for first-time buyers.
The increase in the Annual Investment Allowance threshold (to £1 million) will also remain in place.
The Chancellor will deliver the full Medium-Term Fiscal Plan alongside an Office for Budget Responsibility forecast, and further measures, on 31 October 2022.