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What was in the mini-budget and what has changed? What was in the mini-budget and what is the government's new plan?
(3 days later)
Prime Minister Liz Truss has made a major U-turn on the government's mini-budget, after sacking Chancellor Kwasi Kwarteng. The government will reverse almost all tax measures announced in its mini-budget.
The government has been under intense pressure to change it, following days of turmoil on the financial markets. Plans to cut the basic rate of income tax to 19% have been shelved and support for energy bills scaled back.
So what was announced in the 23 September mini-budget and what has the government had to change since? The mini-budget was only unveiled on 23 September, but caused turmoil on financial markets.
Income tax - basic rate
What was announced:
The basic rate was to be cut to 19% from April 2023. The government said this would save 31 million people £170 a year
People in England, Wales and Northern Ireland pay 20% on any annual earnings between £12,571 to £50,270 - rates in Scotland are different
The rate was already due to be cut in 2024, but this was brought forward
What has changed:
The basic rate of income tax will remain at 20%
Cutting it has been put on hold "indefinitely"
Income tax - higher rate
What was announced:
45% rate of income tax for earnings over £150,000 abolished for England, Wales and Northern Ireland taxpayers
One single higher rate of income tax of 40% from April next year
What has changed:
The government had already U-turned on the cut to the higher rate, which is no longer going ahead
Corporation taxCorporation tax
What was announced:What was announced:
Cancel UK-wide rise in corporation tax which was due to increase from 19% to 25% in April 2023Cancel UK-wide rise in corporation tax which was due to increase from 19% to 25% in April 2023
What has changed:What has changed:
Ms Truss has now announced that she is dropping this change. UK corporation tax will go up from 19% to 25% in April 2023 after all. Ms Truss had already announced that UK corporation tax will go up from 19% to 25% in April 2023 after all
Does cutting corporation tax always raise more money?Does cutting corporation tax always raise more money?
Income tax Energy bills
What was announced:What was announced:
Cut in basic rate of income tax to 19% from April 2023 The government said a typical household using both gas and electricity would pay £2,500 annually for two years. It announced this before the mini-budget
Government estimates 31 million people getting £170 a year more
Currently, people in England, Wales and Northern Ireland pay 20% on any annual earning between £12,571 to £50,270 - rates in Scotland are different
45% higher rate of income tax abolished for England, Wales and Northern Ireland taxpayers
One single higher rate of income tax of 40% from April next year
What has changed:What has changed:
Before his sacking, Mr Kwarteng U-turned on the higher rate change. He announced that the scrapping of the 45% rate would not go ahead, after it had proved "a massive distraction" to the rest of the mini-budget. The energy price guarantee now only covers this winter. I will be in place until April next year
A Treasury-led review will look at what measures should be put in place after this date
How is the energy price cap changing?
IR35 rules
What was announced:
The government had promised to change the rules on off-payroll working, known as IR35, so companies were no longer responsible for ensuring their contractors were paying the right amount of tax.
It said the current system created "unnecessary complexity and cost" for businesses.
What has changed:
This reform, which the government said would have cost £2bn a year, will no longer go ahead.
What else has been cancelled?
Other measures that have been cancelled include:
VAT-free shopping for overseas visitors, which the government said would cost £2bn
A freeze on alcohol duty, which would have cost £600m
Cuts to the tax paid on shareholders' dividends. An increase introduced in April will stay in place, saving about £1bn
What measures are staying?
Measures announced in the mini-budget that have not been cancelled include:
National InsuranceNational Insurance
Reverse recent rise in National Insurance (NI) from 6 NovemberReverse recent rise in National Insurance (NI) from 6 November
Workers and employers have paid an extra 1.25p in the pound since AprilWorkers and employers have paid an extra 1.25p in the pound since April
New Health and Social Care Levy to pay for the NHS will not be introducedNew Health and Social Care Levy to pay for the NHS will not be introduced
What is national insurance? Will National Insurance changes leave me better off?
Benefits
Rules around universal credit tightened, by reducing benefits if people don't fulfil job search commitments
Around 120,000 more people on Universal Credit to be asked to take steps to seek more work, or face having their benefits reduced
Jobseekers over 50 to be given extra time with work coaches to help them return to job market
What is universal credit?
Work and investment
IR35 rules - the rules which govern off-payroll working - to be simplified
Annual investment allowance, the amount companies can invest tax free, remains at £1m indefinitely
Regulations change so pensions funds can increase UK investments
New and start-up companies able to raise up to £250,000 under scheme giving tax relief to investors
Share options for employees doubled from £30,000 to £60,000
Stamp dutyStamp duty
Cut to stamp duty which is paid when people buy a property in England and Northern IrelandCut to stamp duty which is paid when people buy a property in England and Northern Ireland
No stamp duty on first £250,000 and for first time buyers that rises to £425,000 - comes into operation todayNo stamp duty on first £250,000 and for first time buyers that rises to £425,000 - comes into operation today
200,000 more people will be taken out of paying stamp duty altogether, government claims200,000 more people will be taken out of paying stamp duty altogether, government claims
What are the new stamp duty rates?What are the new stamp duty rates?
Energy Benefits
Freeze on energy bills, which the government claims will reduce inflation by 5 percentage points Rules around universal credit tightened, by reducing benefits if people don't fulfil job search commitments
Total cost for the energy package expected to be around £60bn for the six months from October Around 120,000 more people on Universal Credit to be asked to take steps to seek more work, or face having their benefits reduced
Jobseekers over 50 to be given extra time with work coaches to help them return to job market
How are universal credit rules changing?
Bankers' bonusesBankers' bonuses
Rules which limit bankers' bonuses scrapped Rules which limit bankers' bonuses to twice their fixed salary to be scrapped
Package of regulatory reforms to be set out later in the autumnPackage of regulatory reforms to be set out later in the autumn
Shopping
VAT-free shopping for overseas visitors
Planned increases in the duties on beer, for cider, for wine, and for spirits cancelled
Infrastructure and investment zones
Government discussing setting up investment zones with 38 local areas in England
Tax cuts and liberalised planning rules to be offered to release land for housing and commercial use
Investment zones offered measures such as no business rates and stamp duty waived
New legislation to cut planning rules, get rid of EU regulations and environmental assessments in an effort to speed up building
Unions
Plan to introduce Minimum Service Levels, requiring a "minimum service" to be provided when there are public transport strikes
New legislation which would require unions to put all pay offers to a member vote before a strike can be held
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