Following the Prime Minister’s announcement that corporation tax rates would increase from April 2023, Chancellor Jeremy Hunt has announced the reversal of many tax measures that were introduced at the mini-budget on 23 September. This announcement was made ahead of the Medium-Term Fiscal Plan on 31 October.
The Chancellor stated in his speech that more difficult decisions will have to be made on both tax and spending. In light of this, government departments will be asked to find efficiencies within their budgets. It is expected that the Chancellor will announce further changes to fiscal policy on 31 October.
Mini-budget tax measures that are not proceeding
The Chancellor confirmed that the basic rate of income tax will remain at 20%. At the mini-budget announcement, the planned cut to the basic rate of income tax to 19% was brought forward from April 2024 to April 2023.
The 17 October statement confirms that: “While the government aims to proceed with the cut in due course, this will only take place when economic conditions allow for it and a change is affordable. The basic rate of income tax will therefore remain at 20% indefinitely.”
The 1.25 percentage point increase in dividend tax rates that was introduced alongside the increase in national insurance contributions rates from April 2022 will remain. Dividend tax rates will no longer be cut from April 2023.
The 2017 and 2021 reforms to the off-payroll working rules will remain in place. They will not be repealed from April 2023. Frank Haskew, Head of Taxation Strategy at ICAEW says, “While this retains the measures that were designed to improve compliance in this area, plus the income tax rate on dividends from personal service companies will remain higher, it remains the case that the taxation of work requires a fundamental review.”
Other measures that will not proceed are:
- a digital VAT-free shopping scheme in Great Britain; and
- freezing alcohol duty rates from 1 February 2023.
Mini-budget tax measures that are confirmed
The government’s reversal of the 1.25 percentage point national insurance contribution rate increase from 6 November 2022 and the abolition of the Health and Social Care Levy that had been due to come into force from April 2023 will go ahead as planned. The legislation to enact this change is at an advanced stage in the parliamentary process.
The reduction in stamp duty land tax (SDLT) in England and Northern Ireland also remains. The power to change the SDLT rates for residential property transactions on or after 23 September was given short-term statutory effect by a provisional collection of taxes motion on 23 September.
The statement confirms that the permanent £1m annual investment allowance threshold and changes to the seed enterprise investment scheme and the company share option plan will also continue as planned.
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Aftermath of September's Fiscal Event
Read ICAEW's analysis and reaction to the 23 September mini-budget and the new Chancellor's statement of 17 October, confirming plans to reverse most tax cuts and scale back energy price support.
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