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Almost all of the tax changes announced in last month’s mini-Budget have been scrapped by the new chancellor.
Jeremy Hunt’s announcement aims to deliver ‘confidence and stability’ to the economy following the turbulence caused by Liz Truss and Kwasi Kwarteng’s radical plans.
Read on to find out what the announcements mean for small businesses and the self-employed.
This article was updated on 26 October 2022.
Plans to cut the rate of income tax by one per cent in April 2023 have been scrapped.
This means the basic rate of income tax will remain at 20 per cent indefinitely.
Keeping income tax at the same rate will save the government an estimated £5 billion.
The mini-Budget measure to get rid of the 45 per cent tax rate for the highest earners was reversed on 3 October.
Following the mini-Budget, IR35 reforms were set to be repealed next April.
However, the new chancellor has confirmed that the reversal of these reforms won’t go ahead.
This means the responsibility for working out IR35 status will remain with the client for medium and large-sized businesses.
Dave Chaplin, CEO of tax compliance firm IR35 Shield, described the previous chancellor’s commitment to repealing IR35 reform as ’sensible’ and a ‘significant step forward for the UK’s self-employed’.
He said: "Repealing off-payroll would have returned an essential level of certainty to contract transactions in the market economy, leading to economic growth. Instead, off-payroll will continue to cause significant harm to the self-employed, major businesses, the government, and the economy.”
In response to soaring energy prices, the government announced an Energy Bill Relief Scheme that offered financial support to businesses from 1 October until March 2023.
In the emergency statement, the chancellor said the scheme will remain the same until April. After that, it’ll be replaced by a more targeted scheme that will "cost the taxpayer significantly less than planned".
Jeremy Hunt said “it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices” and that “any support for businesses will be targeted to those most affected and the new approach will better incentivise energy efficiency.”
The support your business gets won’t change between 1 October and March 2023. More details will likely be announced when the chancellor outlines the government's spending plans on 17 November.
Scrapping a corporation tax rise is another of the mini-Budget measures that was reversed before the emergency statement.
This means the rate of corporation tax will rise from 19 per cent to 25 per cent in April 2023.
It’s estimated that the planned rise in corporation tax will increase government revenue by around £18 billion.
The news that the corporation tax rise will go ahead broke on Friday 14 October, just hours after Kwasi Kwarteng was sacked and replaced by Jeremy Hunt.
Cuts to stamp duty and National Insurance are the two major policies announced in the mini-Budget that haven’t been scrapped by the new chancellor.
This means property buyers will continue to benefit from paying no stamp duty on the first £250,000 of a purchase, while first-time buyers will only pay stamp duty on properties worth £425,000 and above.
From 6 November, National Insurance will be cut by 1.25 per cent. This is a reversal of the 1.25 per cent rise introduced in April when Rishi Sunak was chancellor.
The average taxpayer is expected to benefit from an extra £330 a year when the changes come into force next month.
Alongside the U-turns on tax changes detailed above, Jeremy Hunt has announced that several more measures put forward in the mini-Budget will no longer be going ahead. These include:
The emergency statement was designed to bring stability back to the UK economy and calm the financial markets.
The next economic statement will be on 17 November with more details on the tax cuts that are going ahead, plus an update on public spending plans.
It will also have commentary and forecasts from the Office for Budget Responsibility, the independent body that wasn't involved in last month’s mini-Budget.
With economic and political news moving so quickly at the moment, make sure you check the Knowledge centre for regular updates.
Zach Hayward-Jones and Conor Shilling
Zach is a writer for Simply Business that specialises in covering breaking news and government updates.
Conor has worked as a professional writer for 10 years, specialising in the buy-to-let market, landlords, and small business finance.
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