U-turns on Mini-budget announcements
The new Chancellor of the Exchequer, Jeremy Hunt, has today announced a dramatic reversal of the former Chancellor’s 23 September 2022 mini-Budget measures.
This includes scrapping the following measures:
- the reversal of the IR35 changes – the rules introduced in 2017 and 2021 will now remain in place and so responsibility for determining employment status will fall on the organisations that engage contractors, and not on the contractors themselves; and
- the reduction to the income tax basic rate – the basic rate will now remain at 20% indefinitely.
These changes follow on from the reversal of: (i) the cancellation of the increase to corporation tax (i.e. an increase next year to 25%); and (ii) the abolition of the top (additional) rate of income tax.
In the House of Commons, the Chancellor has said that “hard decisions” must be made. It is unclear what will happen to all tax measures, for example on any potential windfall tax. It appears that nothing is off the table. Hopefully, there will be more clarity following the Medium Term Fiscal Plan announcement on 31 October.
The mini-Budget measures that remain in place are limited to those that are too far advanced to change. Measures to reduce the SDLT rate on residential property in England and to scrap the Health & Social Care Levy will be retained.
Such sweeping changes made by the government in such a short timescale must be unprecedented. Looking forward, it would be helpful if this U-turn will be followed by a return to the more usual pattern of announcements at a Budget, followed by changes made through the Finance Bill.