Nearly all tax-cutting measures unveiled in the mini-budget will be reversed, the new Chancellor Jeremy Hunt announced on Monday.
In a humiliating climbdown for the government, the Chancellor said that the proposed cut in the basic rate of income tax from 20p to 19p would be reversed indefinitely, while help towards energy bills would be scaled back sooner than expected. The energy bills guarantee will now only last until April 2023, despite the previous Chancellor Kwasi Kwarteng having committed to the guarantee lasting for two years in the mini budget.
Here, we look at what’s no longer changing, and which of the few measures announced in the mini budget the government plans to stick with.
Measures that are no longer happening or are changing
The Chancellor Jeremy Hunt said that there will no longer be a freeze on alcohol duty rates, and the system of tax collection for self-employed people won’t be relaxed. Several other measures announced in the mini budget are also no longer happening.
Energy Price Guarantee
The government originally committed to the Energy Price Guarantee, which means a typical UK household will now pay an average of up to £2,500 a year on their energy bills, for two years.
It has now reneged on this promise, and said that the guarantee will only apply until April 2023, at which point it will be scaled back and replaced with a more targeted approach to help those most in need. The £400 energy bills discount for all households will still apply.
Richard Neudegg, director of regulation at Uswitch.com said: “By shortening the Energy Price Guarantee to six months, the government is adding back an unwelcome element of uncertainty to households on what will happen come April.
“If a limited pot of help is available, targeting support at those who need it most is a sensible approach. However, there aren’t many households who won’t be worrying about the cost of energy – and this announcement will reignite those concerns.”
If you’re worried about how you’ll pay your energy bills this winter, our articles The energy bills crisis: what can you do about soaring costs? and 11 practical tips to keep warm and save energy this winter may help.
Income tax cuts
In the initial mini-budget the government announced plans to lower the basic rate of income tax from 20p to 19p from April 2023, but also that the highest rate of income tax was to be scrapped altogether.
This would have meant that those paying the additional rate tax of 45% for earnings over £150,000 would have seen this tax rate fall to 40%. However, following widespread criticism of the announcement, the government reversed this earlier in October. You can read more about this in our article Government makes u-turn on scrapping of 45p tax rate.
The government has now also back-tracked on reducing the basic rate of income tax next year, so it will remain at 20p indefinitely. Myron Jobson, senior personal finance analyst at interactive investor, said; “Combined with freezes to various tax-free allowances and thresholds and rampant inflation, this is set to dent millions of pay packets in the coming years. Known as ‘fiscal drag’ this is the ultimate stealth tax, leaving less money in our pockets and making it harder to build wealth.”
Compare cheap car insurance quotes
Car insurance renewal premiums have a habit of increasing every year, even if you haven’t made a claim. Compare car insurance quotes from over 110 UK providers – you could save up to £490* per year.
*51% of consumers could save £490.26 on their Car Insurance. The saving was calculated by comparing the cheapest price found with the average of the next four cheapest prices quoted by insurance providers on Seopa Ltd’s insurance comparison website. This is based on representative cost savings from June 2023 data. The savings you could achieve are dependent on your individual circumstances and how you selected your current insurance supplier.
Dividend tax
Cuts to the dividend tax rate have been scrapped, affecting business owners and investors who hold investments outside ISAs, or who have pensions whose dividends breach the annual allowance.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown said: “This particular tax was only introduced in 2016 and has changed dramatically since. It’s not just that rates have been hiked but the allowance was also slashed from £5,000 to £2,000 in 2017. It shows how difficult it is to rely on these allowances, and how valuable it can be to protect investments from tax forever inside an ISA.”
Learn more about ISAs in our guide Everything you need to know about ISAs.
Freezing of corporation tax
The planned increase in corporation tax next year has been reversed, with this change announced shortly after the mini budget was unveiled. This tax is based on the annual profits that a company makes, and it was due to increase from 19% to 25% in April 2023, but will now remain as it stands.
Measures that are staying
Only a handful of the tax-cutting measures announced in the mini budget are set to stay.
National Insurance
Next April’s National Insurance 1.25 percentage point rise will still be reversed, so that almost 28m people will keep an extra £330 of their money on average next year. Read more in our article National Insurance hike scrapped.
Rob Morgan, chief investment commentator at Charles Stanley, said: “A 1.25 percentage point increase in National Insurance was implemented by Rishi Sunak in April. A rewind of this was announced by Mr Kwarteng ahead of his mini budget and will still take place from November 6. The planned ‘health and social level’, an equivalent but separate tax which was expected to come into force in April 2023, was shelved by the previous Chancellor and that remains the case.”
Stamp duty
The Chancellor confirmed that changes to Stamp Duty announced in the mini budget will remain, so that there will be no Stamp Duty to pay on the first £250,000 of any property purchase following the Chancellor’s announcement. For first-time buyers, the Stamp Duty threshold has been raised from £300,000 to £425,000. The value of the property on which first-time buyers can claim relief has also risen from £500,000 to £625,000.
Read more about how Stamp Duty works in our article Stamp Duty explained.