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18/10/2022 – What was in the mini-budget and what is the government’s new plan?

The government will reverse almost all tax measures announced in its mini-budget.

Plans to cut the basic rate of income tax to 19% have been shelved and support for energy bills scaled back.

The mini-budget was only unveiled on 23 September, but caused turmoil on financial markets.

Income tax – basic rate

What was announced:

  • The basic rate was to be cut to 19% from April 2023. The government said this would save 31 million people £170 a year
  • People in England, Wales and Northern Ireland pay 20% on any annual earnings between £12,571 to £50,270 – rates in Scotland are different
  • The rate was already due to be cut in 2024, but this was brought forward

What has changed:

  • The basic rate of income tax will remain at 20%
  • Cutting it has been put on hold “indefinitely”

  • Income tax – higher rate

    What was announced:

    • 45% rate of income tax for earnings over £150,000 abolished for England, Wales and Northern Ireland taxpayers
    • One single higher rate of income tax of 40% from April next year

    What has changed:

    • The government had already U-turned on the cut to the higher rate, which is no longer going ahead

    Corporation tax

    What was announced:

    What has changed:

    • Ms Truss had already announced that UK corporation tax will go up from 19% to 25% in April 2023 after all

    Energy bills

    What was announced:

    What has changed:

    • The energy price guarantee now only covers this winter. I will be in place until April next year
    • A Treasury-led review will look at what measures should be put in place after this date

    • IR35 rules

      What was announced:

      • The government had promised to change the rules on off-payroll working, known as IR35, so companies were no longer responsible for ensuring their contractors were paying the right amount of tax.
      • It said the current system created “unnecessary complexity and cost” for businesses.

      What has changed:

      • This reform, which the government said would have cost £2bn a year, will no longer go ahead.

      What else has been cancelled?

      Other measures that have been cancelled include:

      • VAT-free shopping for overseas visitors, which the government said would cost £2bn
      • A freeze on alcohol duty, which would have cost £600m
      • Cuts to the tax paid on shareholders’ dividends. An increase introduced in April will stay in place, saving about £1bn

      Source: UK Government