New Chancellor Jeremy Hunt’s Emergency Budget Announcement

The government has been in total disarray since the recent 'mini-Budget' with U-turns on several policies and announcements, the dismissal of Kwasi Kwarteng and now another fiscal statement made by the new Chancellor, Jeremy Hunt.

While the new Chancellor will be delivering a full Medium-Term Fiscal Plan on 31 October alongside the Office for Budget Responsibility’s (OBR) forecast, the bulk of his plans were announced earlier today in an effort to stabilise the financial markets following the chaos caused by Kwasi Kwarteng's not-so-mini ‘mini-Budget’.

With Mr. Kwarteng’s plan to lower taxes and spend more to boost the economy causing the pound to quickly plummet, it was no surprise that the new Chancellor’s approach was the complete opposite.

This morning we heard a concise proposal to increase taxes and slow down spending to “ensure sustainable public finances underpin economic growth” amid the cost-of-living crisis. The brief summary largely focussed on amendments to three key measures from September’s fiscal event; Income Tax, Corporation Tax and The Energy Price Guarantee. 

What did the Chancellor announce in today’s emergency statement?

Jeremy Hunt is looking to raise £32bn by essentially hitting the reset button on Prime Minister Liz Truss’s economic policy and reversing nearly all of the tax cuts delivered in September's ‘mini-Budget'.

Income Tax 

The basic rate of income tax will no longer be cut by 1%. 

Although many speculated Mr. Hunt would delay this change until 2024 as originally planned by Rishi Sunak in the 2022 Spring Statement, the new Chancellor stated today that the basic rate will remain at 20% indefinitely - scrapping the tax cut “until economic circumstances allow for it to be cut”. 

Ex-Chancellor Kwasi Kwarteng also announced in the days following his Growth Plan statement that the 45% higher rate tax cut would not be implemented as it became a "distraction" to the overall objective. 

Corporation Tax 

The new Chancellor confirmed that the planned freeze to Corporation Tax would be cancelled and the increase from 19% to 25% will take effect from 1 April 2023.

This was first announced by Liz Truss just days ago when her optimistic Growth Plan backed by borrowing “went further and faster than markets were expecting”.

The Energy Price Guarantee

The Chancellor reaffirmed the government's commitment to help support with the rising energy costs, specifically over the upcoming winter months. However, the Energy Price Guarantee scheme has been revised and will no longer last for two years – it will now end in April 2023. 

Additional announcements

Mr. Hunt also withdrew a number of uncosted tax cuts, including: 

• The reduction in Dividend tax rates by 1.25% 
• The VAT-free scheme for international tourists 
• The Alcohol duty freeze from February 2023 for one year
   

"I remain extremely confident about the UK's long term economic prospects as we deliver our mission to go for growth. But growth requires confidence and stability, and the United Kingdom will always pay its way."

- Chancellor Jeremy Hunt

What changes will remain in place? 

Health and Social Care Levy Reverse

The 1.25% Health and Social Care Levy reversal will stand. 

• From 6 November 2022 the 1.25% National Insurance rates increase will be reversed 
• The Health and Social Care Levy which was meant to be introduced as a separate tax in April 2023 has been scrapped 
• The reduced NICs are projected to save taxpayers an average of £330 a year  

Stamp Duty Cut

As it was effective immediately, the cut to Stamp Duty charges will also remain. 

• The Stamp Duty Land Tax (SDLT) threshold has increased, no Stamp Duty will be paid on properties purchased under £250,000 (previously £125,000) 
• First-time home buyers will now pay SDLT from £425,000 (previously £300,000) 
• First-time buyers relief has also increased from £500,000 to a maximum of £625,000 

What can we expect in the Chancellor’s next announcement? 

Jeremy Hunt’s full fiscal plan will be delivered on 31 October and while this morning addressed many key announcements, it is highly likely that more will follow in two weeks time. This may include the reversal of the proposed changes to the IR35 rules and perhaps a discussion on bankers’ bonuses - although this topic has been quietly overlooked.

How can DSA Prospect help?

As always, more news on these announcements will continue to develop and this is a merely a guide to some of the main points initially discussed.

We recommend seeking further consultation on any questions you may have regarding this emergency mini-Budget and encourage you to get in touch with our team.