Mini Budget 2022: Chancellor slashes taxes
Update (17/10/2022): the Government will reverse almost all tax measures announced in its mini-budget, including Corporation Tax, Income Tax, Alcohol Duty and VAT - learn more.
After weeks of whispers and rumours, today, the Chancellor, Kwasi Kwarteng, presented an emergency mini Budget to help tackle the cost of living crisis.
Addressing MPs for the first time since his appointment, Kwarteng has announced a variety of tax cuts in an attempt to end the 'cycle of stagnation'.
With the pound’s value continuing to drop, falling below $1.12 for the first time in 37 years, and interest rates increasing to 2.25%, the highest for 14 years, this much-needed support comes as a relief to many.
Income tax cuts
The basic rate of income tax will be reduced a year ahead of the scheduled change.
Kwarteng stated: “I can announce today that we will cut the basic rate of income tax to 19% in April 2023 – one year early.
That means a tax cut for over 31m people in just a few months’ time. We will have one of the most competitive and pro-growth income tax systems in the world.”
Stamp duty cuts
Another cut announced was regarding stamp duty.
The Chancellor stated that in England and Northern Ireland, they’re raising the threshold of how much a property has to cost before stamp duty is paid to £250,000.
Additionally, first-time buyers who currently pay no stamp duty on the first £300,000 are seeing a change, with that threshold figure increasing to £425,000.
The value of the property on which first-time buyers can claim relief is also increasing from £500,000 to £625,000.
Kwarteng commented: “the steps we’ve taken today mean 200,000 more people will be taken out of paying stamp duty altogether. This is a permanent cut to stamp duty, effective from today.”
National Insurance increase reversal
As predicted, the Chancellor has confirmed that the recent rise to National Insurance will be reversed from 6 November.
Initially, ex-Chancellor, Rishi Sunak, increased National Insurance by 1.25% to help fund health and social care.
However, when running for Prime Minister, Lizz Truss, made it clear that she wanted this increase reversed, stating that funding will now come from general taxation.
Corporation Tax rise scrapped
The mini Budget has confirmed that the Government is scrapping the planned increase to the amount of tax companies pay on their profits.
Under plans created by the previous Prime Minister, Boris Johnson, Corporation Tax was meant to rise from 19% to 25%.
However, by eliminating the increase, the Chancellor hopes to attract more companies to the UK, encouraging greater investment, which results in more money subsequently being paid through tax.
Focus now on growth
The Chancellor ended his statement with a few simple words: “focus now on growth.”
It seems that the Government is set on making Britain globally more competitive, promising a new approach in a new era.
However, this mini Budget has not come without criticism; Rachel Reeves, Labour's Shadow Chancellor, says: “It is unprecedented to have a fiscal statement of this scale with no independent forecasts from the office of Budget responsibility.
"Never has a Government borrowed so much, and explained so little.”
Frankly, only time will tell whether these changes are what our economy needs for growth or whether high rates of borrowing will backfire.