Jeremy Hunt’s financial plan key announcements: IR35 repeal removed, tax changes and more!

Chancellor Jeremy Hunt has announced that the Government will reverse almost all of the tax measures announced in the mini-budget that have not yet been legislated. Continue reading to discover the key announcements and find out what is changing.

The new Chancellor brought forward measures from the medium-term fiscal plan that will support “fiscal sustainability”, the Treasury said. Jeremy Hunt brought forward the announcement to calm the markets, which have been turbulent since previous Chancellor Kwasi Kwarteng set out the tax-cutting mini-budget. You can view the complete statement on the Government’s website.

IR35 repeal removed

The Government has announced that they will no longer repeal the 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) from April 2023. As a result, end hirers will remain responsible for determining the IR35 status of contractors providing their services through a Personal Service Company (PSC). The party responsible for making payments to the PSC in the contractual chain will also remain accountable for deducting the relevant income tax and National Insurance for every payment made and paying this to HMRC.

Income Tax

The Chancellor has announced that the Government will scrap the previous Chancellor’s plans to reduce the basic income tax rate from 20% to 19% in April next year. As part of his announcement, Hunt says the basic income tax rate will remain at 20% and will do so “indefinitely” until economic circumstances allow it to be cut.

The changes follow widespread criticism of the measures announced in Kwasi Kwarteng’s mini-budget last month, which included the removal of the 45% higher rate income tax band. The Government has reversed the decision to remove the 45% tax band after the decision caused volatility in the financial markets.

Restoring planned Corporation Tax rises

The Government has announced that they will restore the planned rise in corporation tax next spring. From April 2023, corporation tax will increase from 19% to 25%. The previously announced small profits rate of corporation tax will also be maintained. Smaller or less profitable businesses will not pay the total 25% rate, and companies with less than £50,000 of profits will continue to pay corporation tax at a rate of 19%.

VAT-free shopping for international tourists scrapped

Chancellor Jeremy Hunt has also scrapped Kwasi Kwarteng’s plans for VAT-free shopping for international tourists. International shoppers pay several taxes, such as VAT, when they buy products. These taxes are usually already factored into the sales price.

Duty-free makes products cheaper for international tourists by removing local taxes, with the expectation that the product or item purchased will leave the country. Previously, tourists could claim back VAT at the airport or rebate agencies. But Rishi Sunak removed this during his stint as Chancellor. Ex-Chancellor Kwasi Kwarteng announced that he was bringing back the tax rebate – but current Chancellor Jeremy Hunt has since reversed those plans.

Energy price guarantee to end early

Energy bills were initially frozen at £2,500 for the typical household for two years, but the Chancellor has said the price guarantee will only last until April. Support between now and April will not change, but beyond that, “it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices”. The Treasury will review how energy bills are supported beyond April. Hunt says the objective is to design a new approach that will “cost the taxpayers significantly less than planned while ensuring support for those most in need”.

Dividend tax increase remains in place

In April, all dividend tax rates increased by 1.25%:

• Basic rate taxpayers now pay 8.75%, up from 7.5%
• Higher-rate taxpayers now pay 33.75%, up from 32.5%
• Additional-rate taxpayers now pay 39.35%, up from 38.1%

The rate increases were due to be abolished in April 2023, but the Government has announced that they will remain in place.

What has not changed?

Stamp duty

Stamp Duty Land Tax is a lump sum payment you must make when purchasing a property over a certain threshold. Under the previous system, no stamp duty was paid on the first £125,000 when buying a property. The Government has doubled that in the last mini-budget to £250,000 for all home purchases, which will remain in place. The threshold at which the duty was paid for first-time buyers was also increased to £425,000.

National Insurance reversal

The Government has confirmed that the plans to reverse the 1.25% rise in national insurance will remain in place and be removed on the 6^th November 2022. The increase in the national insurance threshold, introduced in July, will remain the same.

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