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Hunt yanks the hand-brake on Trussonomics

Less than a month after September’s derided mini-Budget, the new Chancellor Jeremy Hunt yesterday reversed many of the major tax announcements made by his predecessor Kwasi Kwarteng.

We are therefore largely back to the plans made by Rishi Sunak.

Key points announced by Jeremy Hunt include:

  • The basic rate of income tax will remain at its current level of 20% indefinitely, rather than reducing to 19% from April 2023 as previously planned
  • On dividends, each income tax rate band will retain the extra 1.25 percentage points added from April 2022, which were scheduled to be withdrawn from April 2023
  • The off-payroll working reforms introduced in 2017 and 2021 will now not be repealed. Companies will remain responsible for determining the employment status of workers working through an intermediary
  • As previously announced, the additional rate of income tax will remain in place, and the corporation tax rate for large companies will increase to 25% from April 2023, as originally planned.

Hunt pared back the energy price guarantee, confirming the measure will now remain only until April 2023. The universal support was supposed to last for two years.

He also scrapped the pledge to freeze alcohol duty rates from 1 February 2023 for a year, much to the dismay of the hospitality sector.

Some tax cuts have remained, including:

    •  The 1.25% increase to the rates of national insurance, which has applied since April 2022, will still be reversed. This is currently planned from 6 November
    • The increased nil-rate threshold of £250,000 for stamp duty land tax (SDLT) will be retained
    • The annual investment allowance (AIA) will remain at its increased level of £1 million per year indefinitely

The Chancellor’s medium-term fiscal plan is scheduled for 31 October. It will be released alongside forecasts from the Office for Budget Responsibility, and Mr Hunt has hinted we may see further tax announcements then.

Harwood Hutton’s Head of Tax Cormac Marum described Jeremy Hunt’s statement as a hand-brake turn on the Government’s tax policy.

“Virtually all the signature measures announced in Kwasi Kwarteng’s ‘fiscal event’ on 23 September 2022, which he planned with Prime Minister Liz Truss, have now been consigned to the dustbin,” said Cormac.

“All that seems to remain is the 1.25% reduction in NIC rates which has apparently managed to sneak through Parliament before Jeremy Hunt could do anything about it.

“Owner managers of companies are bearing the brunt of the tax changes announced yesterday – the rate of corporation tax is facing the single greatest increase in its history and the 1.25% surcharge on dividend tax is staying despite the equal reduction across the board in NIC rates on which it was originally justified.

“Who knows if this humiliating reversal in Government policy will assuage the markets and bring much needed stability to the exchange rate? Perhaps what is needed is a full Budget showing both sides of the Government’s ledgers together with an independent OBR assessment.

“It’s not that long ago that such an approach was the standard way to operate; it was the standard way because it made sense.”

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