Government U-turns on majority of mini-budget tax measures

Most tax measures from mini-budget abandoned

Following Kwasi Kwarteng’s departure, new Chancellor of the Exchequer, Jeremy Hunt, has announced that he will be abandoning most of the tax measures announced in last month’s mini-budget. However, the 1.25% reduction in National Insurance Contributions from 6 November will remain.

Which changes have been scrapped?

Income tax

The basic rate of income tax will remain at 20%. The promised 1% cut in income tax has now been put on hold indefinitely.

The Government had already backtracked on its plan to abolish the 45% additional rate of income tax on earnings over £50,000. 

IR35 reforms  

The Chancellor has decided against scrapping the reforms to the off payroll working rules which were due to be scrapped from April 2023. As a result, large and medium sized end user clients will remain responsible for determining the tax status of contractors who provide their services through an intermediary, such as a personal service company. The fee payer (the person who pays the contractor’s intermediary) will remain responsible for operating PAYE and paying employer NICs. Often the end user client will be both the client and fee payer for these purposes.

Corporation tax

Corporation tax will increase to 25% from April 2023. Kwasi Kwarteng’s decision to keep to the current 19% rate has been reversed.

Which changes have been kept?

National Insurance Contributions reduction

The 1.25% reduction in National Insurance Contributions for employers, employees and the self-employed from 6 November is being kept. This reverses the increase that took effect in April this year. The new Health and Social Care Levy which was due to come into force in April next year will not now be introduced.  

Bankers’ bonuses

The cap on bankers’ bonuses is still going to be removed. However, a package of regulatory reforms will be set out later in the Autumn.  

Other changes

The Annual Investment Allowance is to be kept at £1m and proposed changes to Company Share Option Plans (CSOPs) and the Seed Enterprise Investment Scheme (SEIS) will also be kept. Further information on these changes can be found here.

It is unclear whether the Government will proceed with the introduction of Investment Zones.

Further decisions will be announced in the Medium-Term Fiscal Plan on 31 October.