UK Chancellor Brings Forward Further Medium-Term Fiscal Plan Measures

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Anne Melville

Date Posted:

October 17, 2022

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The new UK Chancellor of The Exchequer, Jeremy Hunt, has brought forward a number of measures from his Medium-Term Fiscal Plan, due to be announced on 31 October 2022.  In his statement today  the Chancellor announced a reversal of almost all of the tax measures set out in the Growth Plan (Mini Budget) of 22 September 2022 that have not been legislated for as yet in parliament.

The changes are designed to try to ensure the UK’s economic stability and provide confidence in the government’s commitment to fiscal discipline following the market’s response to the original Growth Plan (Mini Budget).

  • The basic rate of income tax is to remain at 20% indefinitely “until economic conditions allow for it to be cut”. The rate was to be reduced to 19% from April 2023.
  • The plan to cut tax on dividends by 1.25% from April 2023 has been scrapped

The annual dividend allowance will continue to be £2,000. Dividend tax rates will continue to be as follows:

Dividends falling within the Basic rate tax band – 8.75%

Dividends falling within the Higher rate tax band – 33.75%

Dividends falling within the Additional rate tax band – 39.35%

  • The repeal of the Off payroll working rules (IR35) 2017 and 2021 reforms has also been cancelled
  • The new VAT-free shopping scheme for non UK visitors has been scrapped
  • The freeze on alcohol duty rates for 1 year from 1 February 2023 has been cancelled
  • The Energy bills support review measures announced in the Growth Plan (Mini Budget) – The Energy Price Guarantee and the Energy Bill Relief Scheme – will remain in place to support households and businesses from now until April 2023.

A Treasury-led review will now be launched to consider how to support households and businesses with energy bills after April 2023.

The objective of the review is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need. The Chancellor also said in his statement that any support for businesses will be targeted to those most affected and that the new approach will better incentivise energy efficiency.

  • Government departments will be asked to find “efficiencies” within their budgets. 

The Chancellor is expected to announce further changes to fiscal policy on 31 October 2023 to put the public finances “on a sustainable footing”.

Other Announcements

  • The previous UK Chancellor, Kwasi Kwarteng, had already announced on 3 October 2022 that the plan to scrap the additional rate of income tax of 45%, included in the original Growth Plan (Mini Budget) had been cancelled.
  • The Prime Minister, Liz Truss, announced on 14 October 2022 that Corporation Tax will increase, as originally planned, to 25% from 19% in April 2023. This increase had been reversed in the Mini Budget.

All that remains from the original Growth Plan (Mini budget) of 22 September 2022 is:-

  • the reversal of the National Insurance increase of 1.25% from 6 November 2022 and cancellation of the Health and Social Care Levy of 1.25% from April 2023
  • the cuts to Stamp Duty Land Tax which took effect from midnight on 23 September 2022

The nil rate band was doubled from £125,000 to £250,000. There is additional support for first time buyers, who will now pay no SDLT up to £425,000, and the increased value of the property on which first time buyers can claim relief, from £500,000 to £625,000.

Note there has been no changes announced to LBTT rates in Scotland.

  • the Annual Investment Allowance allowing 100% tax relief on certain capital expenditure, including computer equipment and vans, will remain at £1million beyond April 2023
  • the Seed Enterprise Investment Scheme changes where there will be a widening of the criteria, allowing companies to raise £250,000 under the scheme, 66% more funding than previously
  • the Company Share Options Plan changes where the maximum employee share option limit will be increased from £30,000 to £60,000 for any new options granted from 6 April 2023. There will also be increased flexibility for share options granted from 6 April 2023 due to a removal of conditions around the class of shares used

 

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.

Photo by Christopher Bill on Unsplash

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