Emergency Statement on Mini-Budget 2022
Chancellor’s statement 17 October 2022
New Chancellor Jeremy Hunt has made a statement today to MPs in the House of Commons, reversing most changes in the Mini-budget 2022 that had not already started a parliamentary process.
Following his recent appointment as Chancellor last week, and his reversal of key Mini-Budget measures, new Chancellor Jeremy Hunt is fast-tracking announcements two weeks ahead of the Medium-Term Fiscal Plan.
The Chancellor will still deliver the full Medium-Term Fiscal Plan, to be published alongside a forecast from the independent Office for Budget Responsibility, on 31 October.
Mini-budget measures reversed and retained:
| Mini Budget Measure | Retained? | Key Points |
|---|---|---|
| Corporation Tax freeze | Scrapped | Corporation tax will increase to 25% from April 2023. The Mini-budget in September 2022 had originally reversed this motion to keep corporation tax at 19%. |
| Income Tax changes | Scrapped | Additional 45% higher rate of Income Tax on annual income above £150,000 will remain.
Income Tax basic rate to stay at 20% indefinitely (and allowances remain frozen) |
| Alcohol duty freeze | Scrapped | The freeze to alcohol duty rates announced in the Mini-budget is scrapped. |
| VAT-free shopping | Scrapped | VAT-free shopping scheme for non-UK visitors to Great Britain is scrapped. |
| Dividend rate cut | Scrapped | The Chancellor confirmed that the planned dividend tax rate decrease from 8.75% back down to the original rate of 7.5% for basic-rate payers, 33.75% to 32.5% for higher-rate payers and 39.35% to 38.1% for additional rate taxpayers will be scrapped. |
| IR35 planned changes | Scrapped | The 2017 and 2021 changes to the off payroll working rules (also known as IR35) will no longer be revoked from 6 April 2023 as previously thought. |
| National insurance | Retained | National Insurance rise of 1.25% will be reversed from 6th November 2022. |
| Stamp Duty Land Tax thresholds | Retained | Stamp Duty Land Tax (SDLT) is a lump sum payment you have to make when purchasing property over a certain threshold.
Under the previous system, no stamp duty was payable on the first £125,000 of a residential property purchase. The nil rate band is doubled from £125,000 to £250,000 as per the original Mini budget in September 2022. |
| First-time buyers | Retained | The Government is going even further to support first time buyers, who will now pay no stamp duty on properties purchased up to a value of £425,000 and increasing the value of the property on which first time buyers can claim relief, from £500,000 to £625,000. |
Chancellor Statement – Comments:
The announcement signals the return to the previous Treasury focus on ensuring that public finances should be sustainable in the short-term to provide stability for future growth. The Chancellor used the word ‘stability’ repeatedly throughout his statement today.
The review and potential reform of the Energy Price Guarantee will mean that public finances are unlikely to be fully exposed to changes in natural gas prices, which are denominated in US Dollars and are volatile, making them difficult to forecast. The Treasury may well be forced into extending energy support after April 2023 in a more targeted way if energy rates remain high.
Keeping the 1.25% increase in dividend tax rates whilst scrapping the same rise on NICs seems unfair on shareholders who take dividends. This may indicate that the government are trying to make taking dividends instead of salary less attractive than previous years.
Owner-managers trying to decide what salary/dividends mix to take from April 2023 will find that the tax implications of both will largely be the same. What could make a difference, however, are commercial decisions, or where pension contributions and R&D Tax Credits could be utilised to make a salary more attractive.
The big question is what the Bank of England will do next. It is still too early to tell as we still don’t have clarity on the full suite of policy measures adopted and likely to come.
Get in touch
If you have any questions regarding the details in the Chancellor’s statement, please call the office on 01392 241228 or email Misty at misty@griffinaccountancy.co.uk.
