Mini Budget: Emergency statement October 2022
17 October 2022Our fourth Chancellor in four months, Jeremy Hunt MP, has as expected announced the reversal of almost all the tax measures included in the mini budget of 23 September. Originally planned for 31 October, the government was forced to bring forward these announcements to reduce 'unhelpful speculation', to calm the turmoil in UK markets and to try to reduce the cost of government borrowing.
There will still be a statement in a fortnight's time (planned for 31 October), alongside the all-important numbers about the position of the UK economy from the Office for Budget Responsibility (OBR) – however, it is hoped that the announcements today will go some way towards reassuring markets. The cost of government borrowing did fall slightly this morning, indicating some confidence in the decision to revise spending plans now, and fell further following the announcements at 11.15am today.
So what has remained and what has been scaled back or cancelled? We have listed the main points from the mini budget below, along with any changes from today's announcement. Further detail is expected this afternoon.
What's changed?
| September 2022 announcement | October 2022 change? |
| Energy price guarantee/cap in place for two years for households and six months for businesses | Existing support between now and April 2023 will not change. Beyond that, a Treasury led review will inform how to proceed |
| Basic rate of income tax to be cut to 19% (from 20%) in April 2023 | Cancelled: basic rate of income tax to remain at 20% indefinitely |
| Additional rate of income tax to be abolished from April 2023 (45% tax on income above £150,000 gross pa) | Already cancelled |
| Scrapping of planned rise of corporation tax from 19% to 25% in 2023 | Already cancelled: will rise in 2023 as legislated |
| Doubling of 0% stamp duty bracket from £125,000 to £250,000 | No change |
| Increase of 0% stamp duty bracket for first time buyers from £300,000 to £450,000, and value of property on which first time buyers can claim relief increased from £500,000 to £650,000 | No change |
| 1.25% rise in National Insurance contributions due to run till April 2023 to be reversed from 06 November 2022 | No change |
| Health and Social Care Levy, due to come into force in April 2023 as a separate new tax of 1.25%, will be cancelled. | No change |
| Dividend tax increase of 1.25% from April 2023 to be cancelled | Cancelled: planned rise in dividend tax rates will continue |
| Repeal of IR35 working from April 2023 | Cancelled |
| Annual investment allowance for business investing in plant and machinery to remain at £1M | No change |
| Cap on bankers' bonuses lifted | We believe unchanged / TBC |
| VAT-free shopping scheme for non-UK visitors | Cancelled |
Clearly the emergency statement today was a wholesale roll-back of what had been termed 'Trussonomics'. Ms Truss's leadership is under growing pressure, and it remains to be seen if she can survive. Watch this space.
Readers may be aware that we have seen significant volatility, both in markets and in currency exchanges in recent weeks and we have posted a blog on the topic at the very end of September 2022 here: Where next for the pound?
We would normally recommend that clients and enquirers take a long-term view for pensions and investments. Market volatility is not uncommon, and our Investment Risk Scale looks at this at the foot of the rear page with a graph demonstrating historic market volatility and the respective recovery positions. This is not a guarantee of future performance.
A link may be found here: Investment Risk Scale
No individual advice is provided during the course of this blog.
Keith Churchouse FPFS
Director
CFP Chartered FCSI
Chartered Financial Planner
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