New British finance minister Jeremy Hunt on Monday announced almost a complete U-turn on Prime Minister Liz Truss’s plan to boost economic growth through unfunded tax cuts, which had sent international investors bolting for the exit. Here are some of the policy reversals announced by Hunt, which he said would raise 32 billion pounds ($36.19 billion) for the government finances.
INCOME TAX Truss had planned for the basic rate of income tax to be cut to 19% from 20% in April 2023, one year earlier than expected. Hunt announced this will now stay at 20% indefinitely.
The finance ministry said this will raise around 6 billion pounds a year. The government will no longer proceed with its plan to remove the highest rate of income tax.
ENERGY BILLS SUPPORT Hunt said the government’s support for household and business energy bills will only run to April next year, with a review to consider what support will be needed after that point and how it can be better targeted.
OFF-PAYROLL WORKING REFORMS Hunt has reversed plans to repeal tax rules that seek to raise revenue from off-payroll employees, but which have been criticised for adding to red tape faced by businesses who use contract workers.
Kwarteng had promised to repeal the rules, also known as ‘IR35 reforms’, as part of a push to deregulate and drive growth. Following Hunt’s statement, the finance ministry said the rules would remain in place and would cut the cost of the government’s growth plan by around 2 billion pounds per year.
CORPORATION TAX Britain will now press ahead with its original plan to raise its 19% corporation tax rate – the lowest among the G7 club of rich nations – to 25% in 2023. Truss had planned to keep it at 19%.
The finance ministry had estimated that keeping the rate at 19% would have cost the taxpayer 67.5 billion pounds over the next five years. DIVIDENDS TAX
Hunt reversed the plan to cut the rate of tax on dividends by 1.25 percentage points from next year, which had been valued at around 1 billion pounds a year. ($1 = 0.8842 pounds)
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