United Kingdom: New Chancellor reverses many of the Mini-Budget's tax measures

20 Oct 2022    2 minute read
Mini Budget Tax Measures Workforce Redesign

In brief

The newly appointed Chancellor, Jeremy Hunt, has confirmed a reversal of almost all of the tax changes set forth in Kwasi Kwarteng's controversial Mini-Budget. The tax measures, which affected various employment and employment tax issues, had been publicized on 23 September as part of the UK's 2022 Growth Plan introduced by the conservative government. It remains to be seen whether Liz Truss's resignation on 20 October 2022 will further change matters.

In summary, the basic income tax rate will not be reduced to 19%, the IR35 off-payroll changes will not be repealed, dividend tax rates will not be cut and the corporation tax rate increase will go ahead,. 

The previous changes announced in respect of the banker bonus cap, National Insurance contributions, the Health and Social Care Levy and the Stamp Duty Land Tax will still go ahead, as will proposed limits on strike action in the transport sector.


 

Contents

Comments

The following tax changes from the Mini-Budget have been REVERSED:

  • Income Tax Rates: the basic rate of income tax will remain at 20% 'indefinitely' (no reduction to 19% in 2023). The 45% additional rate of income tax will no longer be abolished. 
  • IR35 rules: the 2017 and 2021 reforms to the off-payroll working rules will remain in place from 6 April 2023 (they will not be repealed).
  • Dividend Tax Rates: the dividend tax rates will not be reduced. The 1.25% increase, which took effect in April 2022, will now remain in place.
  • Corporation Tax Rate: the main rate of UK corporation tax will increase to 25% from 1 April 2023. The Chancellor will confirm the position on the Bank Surcharge in the Medium-Term Fiscal Plan.

The tax changes and proposed employment measures that will REMAIN are:

  • Banker Bonus Cap: the scrapping of this cap remains in force.
  • National Insurance: the reversal of the contributions increase of 1.25% (in effect since April this year) will continue, with the rate of contributions intended to decrease again from 6 November 2022. 
  • Health and Social Care Levy: the levy, which was to be introduced in April 2023, will still be abolished. 
  • CSOP: the increase in the CSOP option limit from GBP 30,000 to GBP 60,000 from 1 April 2023 for qualifying companies will go ahead.
  • Strike action: the government has commenced the legislative process to require unions to ensure that a minimum level of service is maintained during strike action. In addition, the government proposes that trade unions will be required to put pay offers to a member vote before they can take strike action.

Unless Liz Truss's successor decides otherwise, the Chancellor will deliver the full Medium-Term Fiscal Plan on Monday, 31 October. This is currently expected to introduce further changes on policy in an attempt to quell the concerns around the UK's fiscal policies. 

To see our previous client alert on the initial introduction of these tax measures, please use the below link: 

United Kingdom: Mini-budget - Employment and employment tax aspects - Baker McKenzie InsightPlus
 

Contact Information
Jeremy Edwards
Partner
London
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jeremy.edwards@bakermckenzie.com
Gillian Parnell
Senior Associate
London
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gillian.parnell@bakermckenzie.com
Amy Thompson
Associate
London
amy.thompson@bakermckenzie.com

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