New chancellor reverses tax measures in emergency statement

New chancellor Jeremy Hunt has announced that the government will reverse several key decisions made in a mini-budget just one month ago by his predecessor Kwasi Kwarteng.

September's announcement included various headline-making tax adjustments, but many of these will no longer be implemented.

The increase in corporation tax, from 19 per cent to 25 per cent, will now go ahead in April 2023, despite the previous chancellor announcing that the rise would be cancelled.

The 45 per cent tax rate for high earners will now stay in place. The decrease in the basic tax rate, from 20 per cent to 19 per cent is now on hold indefinitely. It had previously been scheduled for 2024 and had been brought forward in the mini-budget.

Other measures, including freezing duty on alcohol and offering VAT-free shopping for overseas shoppers, have also been cancelled.

Some details of the mini-budget have been retained. National insurance, which increased by 1.25 per cent in April, will still revert to its previous rate in November. The changes in stamp duty have also been retained, meaning it will not apply for properties below £250,000, or £425,000 for first-time buyers.

It is hoped that the new announcements will bring stability to the markets and boost the Treasury's income by £32bn per year.

Matthew Johnson, associate partner at Preston-based accountants and business advisors WNJ, said: “The statement by Jeremy Hunt is a massive U-turn designed to help the UK regain economic credibility. The big question remains whether it will be enough to calm the financial turmoil we have seen in recent days.

“Businesses need stability to be able to plan, invest and grow. It makes it so much more difficult if they have to cope with constant U-turns and uncertainty. We need to see stability and we need to see it quickly. As well as calming the markets, businesses need to see measures that will support the economy as we go through what appears to be tough times ahead.

"And that must include targeted energy cost support beyond April next year. Energy costs, rising inflation and interest rates are all massive concerns and issues that need to be addressed.”

Jane Parry, managing partner of Blackburn-based accountancy PM+M, said: "The last few weeks have been a masterclass in how not to run a country’s finances. The emergency statement is evidence of panic and a realisation that if the Treasury waited until 31st October to set out the detail, then the damage that would have been inflicted could have lasted for over a decade. Hopefully, this is the final nail in the coffin for the very brief era of Trussonomics as her economic vision is left in tatters.

"Jeremy Hunt has at least come into the role as chancellor with an air of contrition and a willingness to not throw every economic orthodoxy out of the window. He understands the markets need stability as does the public and the UK’s business community.

"The decision to refuse to commit to energy costs support beyond April next year with still no sign of a windfall tax on the energy companies benefiting from the current situation beggars belief and will cause uncertainty and concern for households and businesses across the UK.

"Overall, the emergency statement was a sobering insight into quite how bad the national finances have become in the brief period of time since Liz Truss took office and the huge cost of correcting it. That shouldn’t be forgotten. We’ve got another instalment in a few weeks’ time so all we can do is buckle up and hold on tight. I don’t think the turbulence is over just yet."