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Tuesday, 18 October 2022 12:53

Chancellor Statements Summary

The new Chancellor of the Exchequer, Jeremy Hunt, was appointed on Friday 14 October and on Monday 17 October he made his first statement as Chancellor. 

 

On Friday, The Prime Minister confirmed that the planned increase in Corporation Tax set to come into effect in April 2023 will now go ahead. This represented a second major U-turn by the Government following former Chancellor Kwasi Kwarteng's Mini Budget. The first U-turn being the announcement to scrap the proposed removal of the 45p personal tax rate from April 2023. 

 

The Corporation Tax main rate will now increase from 19% to 25% on 1 April 2023 for companies with profits over £250,000. A Small Profits Rate (SPR) of 19% will apply for companies with profits of up to £50,000. There will also be a marginal rate of Corporation Tax for companies making profits of between £50,000 and £250,000 meaning an incremental rise in the Corporation Tax rate from 19% to 25% depending on how much profit a firm makes.

 

Almost all the remaining tax measures set out in former Chancellor Kwasi Kwarteng's mini budget that have not yet been legislated for in parliament have been reversed in the new Chancellor's announcement on Monday. In his emergency statement, the Chancellor confirmed that the following tax policies will on longer be taken forward: 

  • Cutting the basic rate of income tax to 19% from April 2023. This means that the basic rate of income tax will remain at 20%. The Chancellor said that any reduction in the basic rate will now only take place when economic conditions allow for it and a change is affordable
  • Cutting dividends tax by 1.25% from April 2023. This means that the 1.25% increase, which took effect in April 2022, will remain in place
  • The moves to simplify IR35 rules, including the repeal of the 2017 and 2021 reforms will not go ahead. The reforms will now remain in place
  • The planned introduction of a new VAT-free shopping scheme for non-UK visitors to Great Britain will not go ahead
  • Freezing alcohol duty rates from 1 February 2023 for a year. This will see the price of beer, cider, wine and spirits increase

The changes are estimated to be worth around £32 billion a year.

 

It was also announced that the Energy Price Guarantee Scheme that came into effect on 1 October 2022 to help tackle the energy crisis and was set to remain in place for two years will now only be guaranteed until April 2023. There is also a parallel Energy Bill Relief Scheme to help cut energy bills for non-domestic energy customers, including UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals that was due to remain in place until 31 March 2023. HM Treasury has announced that a new review will be launched to consider how to support households and businesses with energy bills after April 2023.

 

The Government has confirmed the move to reverse the 1.25% rise in National Insurance contributions (NICs) that came into effect at the start of the 2022-23 tax year on 6 April 2022 remains in place. This will see the reversal of the NIC increase from 6 November 2022 and will cover Class 1 (both employee and employer), Class 1A , Class 1B and Class 4 (self-employed) NICs. It was also confirmed that the ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 will not now go ahead as originally planned.

 

The increase in the Stamp Duty Land Tax (SDLT) nil rate band to £250,000 (from £125,000), effective since 23 September 2022 will also remain in place as will the increased SDLT bands payable for first-time buyers.

 

The increase in the Annual Investment Allowance threshold (to £1 million) will also remain in place.

 

The Chancellor will deliver the full Medium-Term Fiscal Plan alongside an Office for Budget Responsibility forecast, and further measures, on 31 October 2022.

Last modified on Tuesday, 18 October 2022 15:00

        

 
 

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