The new chancellor has rolled back almost all of the mini-Budget’s tax cuts.
The changes to stamp duty will remain, but only because legislation has already been laid to push the measure through parliament.
Jeremy Hunt said: “We will reverse almost all the tax measures announced in the Growth Plan three weeks ago that have not started parliamentary legislation.
“So while we will continue with the abolition of the health and social care levy and stamp duty changes, we will no longer be proceeding with the cuts to dividend tax rates, the reversal of off-payroll working reforms introduced in 2017 and 2021, the new VAT-free shopping scheme for non-UK visitors or the freeze on alcohol duty rates.”
Scrapping the VAT-free shopping scheme will save the Treasury around £2bn. However, not going ahead with the plans is likely to upset many in the retail sector and retail-focused landlords. Cadogan Estates had warmly welcomed the original plans.
The basic rate of income tax will remain at 20% indefinitely – “until economic conditions allow for it to be cut”. The Treasury said this was worth around £6bn a year.
In addition, the IR35 and dividend tax rate reforms will no longer be going ahead, saving a further £3bn a year.
And the “universal cap” on energy costs for two years will now be reviewed in April.
Today’s announcement follows the reversal of the planned corporation tax cut on Friday. Taken together, the reversals are estimated to be worth around £32bn a year.
Hunt said it was “another down payment”. But that still leaves a shortfall of between £30bn and £40bn, depending on whose costings you use. Hunt said the difference would be made up by asking government departments “to find efficiencies within their budgets”.
This is a full reversal of the prime minister’s earlier position, when she said there would be no spending cuts.
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