Today the new Chancellor, Jeremy Hunt has made a further announcement reversing many of the changes that were introduced in the mini budget just a few weeks ago.
So, what does this mean for businesses and their employees?
Income Tax Cut is Cancelled
It had been promised by Rishi Sunak that the basic rate of income tax was to be cut from 20% to 19% by the end of 2024. In the mini budget delivered on 23 September 2022, the then Chancellor Kwasi Kwarteng promised to bring forward this cut to take place in April 2023.
Today, the new Chancellor has confirmed that the basic rate of tax will stay at 20% indefinitely.
The mini budget had also previously included a proposal to abolish the 45% highest rate of tax, but this had already been ruled out last week after being severely criticised.
IR35 reforms to be scrapped
The mini budget had announced plans to repeal the ‘off payroll working’ rules, known as IR35, which made businesses engaging self employed contractors responsible for assessing their correct employment status and ensuring that tax was paid accordingly.
In the mini budget Kwasi Kwarteng had announced plans to reverse the onus on businesses, making it the responsibility of self-employed contractors to ensure that they were paying tax in line with their employment status.
Today, Jeremy Hunt has announced that this reform will now no longer go ahead, which means that businesses will remain responsible for assessing employment status and accounting to HMRC for the tax due for those they engage.
Change to corporation tax
Last year Rishi Sunak had announced that corporation tax would increase from 19% to 25% in April 2023. The mini budget proposed that this would not happen, and that corporation tax would remain at 19%.
However, on Friday it was announced that the plan to reduce corporation tax from 25% to 19% would not go ahead, and Kwasi Kwarteng was sacked as Chancellor.
VAT tax free shopping for non-UK visitors abolished
Jeremy Hunt today announced that the proposed reintroduction of VAT free shopping for foreign tourists would now not go ahead.
This tax perk was originally axed by Rishi Sunak following Brexit in January 2021. The mini budget proposed to bring it back, but there has been a ‘U-turn’ on this, and Jeremy Hunt has confirmed that VAT will still be payable by all consumers.
Energy price guarantee
It was announced today that the Energy Price Guarantee, which meant that households would pay no more than £2,500 for gas and electricity would only run until April, instead of September 2024 as originally planned. The Government have confirmed that a further review will take place before April 2023 to consider further measures that could be put in place at that time.
So, what has stayed?
Jeremy Hunt has confirmed that the health and social care levy will not be introduced, and so national insurance will still reduce by 1.25% to 12%, with effect from 6 November.
The changes to the stamp duty rules will also remain, so that no tax will be paid on the first £250,000 of a property’s value and for first time buyers no duty will be paid on the first £425,000 of a property’s value.
If you are confused about what the latest announcements from the Government mean for you and your business, contact a member of the Employment Team on 0345 646 0406 or fill in our online enquiry form to discuss this further.