Budget U-Turn: Which Measures Did Jeremy Hunt Cancel?
While last month’s Emergency Budget was in itself a U-turn from the previous government’s policies, within less than a month—after the former Chancellor’s announcement caused turmoil in the markets and the pound to plummet—Britain’s tax policies have been turned upside down again, almost like they were never changed in the first place.
- 23 September: Kwasi Kwarteng announces his “Mini Budget”, without a forecast from the Office for Budget Responsibility. Markets react poorly, the pound plummets below $1.10 for the first time in 37 years, gilt markets see a major sell-off.
- 28 September: In response to the market turmoil, the Bank of England announces a temporary bond-buying programme.
- 3 October: Kwarteng announces the first U-turn on his Budget, cancelling the abolition of the additional tax rate.
- 10 October: Kwarteng moves the planned fiscal event from 23 Nov to 31 Oct, announcing it would be accompained by a OBR forecast. The BoE expands its bond-buying programme.
- 12 October: PM Liz Truss rules out any spending cuts to pay for the gap created by unfunded tax cuts.
- 14 October: Truss sacks Kwarteng as chancellor and appoints Jeremy Hunt appointed in his place. Truss also announces the reversal of the Corporation Tax cut. The BoE bond-buying programs comes to an end.
- 17 October: Chancellor Jeremy Hunt issues a statement reversing almost all measures in the Mini Budget.
- 20 October: PM Liz Truss resigns, leaving the future of the Conservative party and her government’s fiscal policies unclear.
Seems like we’re back to square one, but not all of Kwarteng’s measures have actually been cancelled. Below we list in detail how each budget measure is expected to unfold.
Cancelled Or Confirmed, Measure By Measure
EIS, SEIS & VCT enhancements, Confirmed
The extensions and enhancements to the Enterprise Investment Scheme, Venture Capital Trusts and Seed Enterprise Investment Scheme are retained in the same form as they were announced back in September.
Annual Investment Allowance to stay at 1m, Confirmed
While the previous government had planned to reduce AIA to £200,000, Kwarteng had decided to keep it at its previous level of £1m. This measure has been retained by Jeremy Hunt.
Corporation tax cut, Cancelled
As already announced by PM Truss on the 14th, the proposed cut on Corporation Tax will not go ahead. The rate will increase to 25% as planned, starting April 2023.
Abolition of NIC increase, Confirmed
As announced by Kwarteng, the 1.25% increase in NICs will be reversed from 6 November and the planned introduction of a 1.25% Health and Social Care Levy as a separate tax from April 2023 will be cancelled.
Income Tax cuts, Cancelled
As announced by the former-chancellor on 3 October, the 45% tax rate abolition will no longer go ahead.
Additionally, while the former Chancellor had announced that a 1% cut to the basic rate of income tax from 20% to 19% would be brought forward to April 2023, this measure has been postponed indefinitely.
Investment Zones, TBC
Chancellor Jeremy Hunt’s statement did not address the creation of so-called Investment Zones with lower tax rates, which seems to indicate that the plan will go ahead as announced in September
Other Cancelled Measures
- Reversal of IR35 Rules: off-payroll work rules will remain in their current form, with the responsibility still on employers to ensure compliance;
- Alcohol duty freeze: the previously planned increase in alcohol duties will go ahead.
Other Confirmed Measures:
- Stamp Duty Cuts;
- Lifting of bankers’ bonus cap;
- Abolition of the Office for Tax Simplification: still TBC, but likely Confirmed.