17 October 2022

 

Update 17 October 2022: Jeremy Hunt, who is now the government’s 4th Chancellor in 4 months, has delivered an emergency statement which, following Friday’s U-turn to keep Rishi Sunak’s scheduled increase in the rate of corporation tax to 25%, effectively withdraws all of September’s mini-budget tax cuts other than the stamp duty land tax and national insurance changes.  Today’s emergency statement went even further by announcing that the 20% basic rate of income tax will remain indefinitely and also that the energy support scheme for households will now only last for 6 months, rather than the two year period that had previously been announced.  All eyes are now turned to the Chancellor’s Medium Term Fiscal Plan which will be delivered on 31 October 2022 and given what has happened over recent weeks it is very difficult to predict with any certainty what will be announced and also whether it will be Jeremy Hunt who will be delivering the statement!

Our original commentary on the Mini Budget on 23 September 2022

Up until two months ago, most taxpayers whether they be individuals or businesses were resigned to the fact that tax rates could only go up in the foreseeable future given the £400 billion cost to the government in fighting covid during 2020 and 2021.

Turn the clock forward to today and it is quite astonishing that we have just seen the government announce the biggest tax cuts in the last 50 years, particularly on the back of the introduction of the Energy Relief schemes which in themselves will have a very significant cost to the government.

Despite media commentary in the run up to today’s Mini-Budget, there were still a few surprise announcements.  Kwasi Kwarteng’s “rabbit out of the hat” moment was undoubtedly the abolition of the 45% rate of income tax, which means that we return to 40% being the top rate of income tax which was the case back in 2010. 

So how are the government going to pay for these record tax cuts and large spending commitments?  In the short term there will be significant borrowing, but Liz Truss and Kwasi Kwarteng are of the firm belief that these record tax cuts will generate future economic growth that will ultimately lead to additional tax revenues from higher wages and increased business profits.

Will this strategy work?  We think it is fair to say that this radical approach is something of a financial gamble and the outcome is far from certain.  Kwasi Kwarteng certainly has an impressive CV which suggests he has the potential to be a successful chancellor – putting politics to one side, we hope he plays his hand very well!

Click on the headings below to read further information on today’s announcements:

  • Income Tax & NIC
  • Corporation Tax
  • Capital Allowances
  • Investment Zones
  • VAT
  • Stamp Duty Land Tax
  • Energy Bills
  • IR35 Off Payroll Changes
  • Universal Credit

Please click here to read and download our Mini Budget 2022 highlights.

If you have any queries on the Mini Budget 2022 please do not hesitate to contact one of our tax specialists on 01228 530913 or 01768 864466.