Mini-budget: what was announced, and what has changed since?
The government has reversed almost all the planned tax cuts announced in the mini-budget, raising an extra £32bn a year.
On 23 September, then Chancellor Kwasi Kwarteng gave his first financial announcement, billed as a ‘fiscal event’, or 'mini-budget', rather than a full Budget. However, in the weeks that followed, he then reversed plans to abolish the additional rate of income tax and to scrap the planned corporation-tax increase.
In his statement on 17 October, the new Chancellor Jeremy Hunt has gone even further, axing the reduction of basic-rate income tax, cuts to dividend tax rates and the reversal of IR35 rules.
At the time of writing, the government's medium-term fiscal plan is still scheduled to go ahead on 31 October.
Here, we look at the growth plan, what has changed – and how it will affect the pounds in your pocket.
Is income tax changing?
In September's mini-budget speech, the former Chancellor set out plans to reduce the basic rate of tax from 20% to 19% from April 2023 – a year earlier than previously planned.
In his statement on 17 October, new Chancellor Jeremy Hunt announced that this tax cut would not be going ahead next year – in fact, it would not take place at all 'until economic pressures improve'. Working-age people will therefore continue to pay 20% on income above the personal allowance (currently £12,570) indefinitely.
The mini-budget also set out plans to abolish the additional rate of income tax – 45% on incomes over £150,000 – from April 2023. However, this plan was shelved at the beginning of October.
Note that decisions on income tax rates and thresholds are set by the devolved governments in Scotland and Wales.
- Find out more: tax-free income and allowances
National Insurance cuts
Last year, Boris Johnson announced the health and social care levy, which saw National Insurance (NI) contributions rise by 1.25 percentage points in April to raise funds for the NHS and to tackle the social care crisis. The move was controversial, so many will welcome its reversal, which was actually announced the day before the Chancellor's speech.
From 6 November, the rate employees pay on earnings between £12,570 and £50,270 will drop back down to 12%, from its current rate of 13.25%. You'll pay 2% on earnings above £50,270, down from 3.25%. The Treasury says this will make 28 million people £330 on average better off next year.
However, as NI is charged on a percentage of your salary, those on higher earnings will benefit most from this cut. Taking into account how much you would have paid before the NI threshold rise earlier this year, and the rate change from 6 November, the table below shows what NI savings employed workers on different salaries could expect for 2022-23. We've compared what you would have paid if the health and social care levy remained until 5 April 2023, to what you'll pay once it's removed on 6 November.
| Salary | Old total NI for 2022-23 | New total NI for 2022-23 | How much will you save? |
|---|---|---|---|
| £10,000 | £3.98 | £3.98 | £0 |
| £30,000 | £2,398.58 | £2,307.80 | £90.78 |
| £50,000 | £5,048.58 | £4,853.63 | £194.95 |
| £80,000 | £6,050.58 | £5,699.38 | £351.20 |
| £100,000 | £6,700.58 | £6,245.22 | £455.36 |
Changes to NI will still go ahead, but plans to reduce dividends tax by 1.25 percentage points from April 2023 have been scrapped following Jeremy Hunt's statement on 17 October.
- Find out more: National Insurance calculator - work out how much you'll pay
Hear more: listen to our experts discuss the mini-budget in detail on the Which? Money Podcast.
Energy bill reductions
Measures to curb rising energy costs, which were predicted to reach more than £6,000 later this year, will remain – but Hunt says the current help will only be in place for six months.
The price guarantee previously announced by prime minister Liz Truss caps the typical household bill at £2,500 a year. The £2,500 figure is for a 'typical household' – what's actually capped is the price per unit of gas and electricity (plus the standing charge), so what you pay will still depend on how much energy you use.
There will be a Treasury-led review into an alternative energy support solution beyond April 2023, with an aim to reduce costs for taxpayers.
Find out more: energy bills – what are you actually paying for?
Stamp duty changes
A permanent change to stamp duty thresholds in England and Northern Ireland will mean many homebuyers pay less tax.
First-time buyers will pay no stamp duty on properties valued up to £425,000, up from £300,000. People buying their first home will be able to benefit from stamp duty relief on properties worth up to £625,000, up from its previous limit of £500,000.
If you’re already a homeowner and you’re moving house, the 0% rate has been doubled from £125,000 to £250,000. Assuming the other thresholds and rates remain the same, this could save home movers £2,500.
All these changes are effective immediately and are permanent, unlike the temporary changes to stamp duty we saw during the pandemic. The reforms also remain unaffected by Hunt's statement on 17 October.
- Find out more: stamp duty calculator
IR35 repealed
In September, Kwarteng announced a repeal of IR35 – referring to off-payroll working rules that aim to ensure contractors doing work for companies are paying the correct level of tax – from April 2023. These rules were introduced to the public sector in April 2017 and came into force in the private sector in April 2021.
The new Chancellor reversed that plan, and current IR35 rules will remain in place.
Corporation tax rise U-turn
Kwarteng announced that the rise in corporation tax, that was originally planned to come into force from April 2023, will not go ahead.
However, following his sacking and replacement on 14 October, the Prime Minister said the rate increase would go ahead next year after all. This will see corporation tax go up from 19% to 25%.
- Find out more: what is corporation tax?
Alcohol duty
The mini-budget included plans to keep the freeze on alcohol tax. It usually rises each year with RPI, but has been at the same rate since the spring 2021 Budget.
However, this plan was also reversed by Hunt, and will no longer be going ahead.
Find out more: alcohol duty freeze announced in spring 2021 Budget
This story was first published on 23 September 2022. It was updated on 17 October, with updates from Chancellor Jeremy Hunt's emergency budget announcement.
