New Chancellor Jeremy Hunt will be ripping up the bulk of his predecessor Kwasi Kwarteng's package of tax cuts in an effort to stabilise markets, he said in an emergency statement published today (17 October).
Hunt, appointed Chancellor of the Exchequer on Friday (14 October) following Kwarteng's sacking, will be reversing nearly all the tax measures introduced in the government's ‘Growth Plan' on 23 September that have not been legislated for in parliament.
The basic rate of income tax will remain at 20% indefinitely, reversing Kwarteng's plan to cut the basic rate of income tax to 19% from April 2023 and saving public finances up to £6bn a year.
The 1.25 percentage points increase to the dividend tax, valued at £1bn a year, which took effect in April 2022, will now remain in place.
The government will no longer be repealing the 2017 and 2021 reforms to the off-payroll working rules, also known as IR35, from April 2023, cutting the cost of the government's Growth Plan by around £2bn a year.
The introduction of a new VAT-free shopping scheme for non-UK visitors, worth around £2bn per year, and the freeze to alcohol duty rates will no longer take place.
This follows on from the previously announced decisions not to proceed with the proposals to remove the additional rate of income tax and to cancel the planned increase in the corporation tax rate.
Taken together, these changes are estimated to be worth around £32bn a year, the government said, but the hole in the public finances has risen close to £70bn.
The only measures from the Growth Plan that will remain in place are the government's reversal of the National Insurance increase and the Health and Social Care Levy, and the cuts to Stamp Duty Land tax.
The energy bills support scheme will also be reviewed by the Treasury to consider how to support households and businesses with energy bills after April 2023.
The objective of the review is to "design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need".
"The government has today decided to make further changes to the Mini Budget, and to reduce unhelpful speculation about what they are we have decided to announce these ahead of the medium term fiscal plan, which happens in two weeks," the chancellor said in his statement.
Hunt and Prime Minister Liz Truss are aiming to reassure government bond markets by reducing the costs of servicing government debt and minimising the amount of further spending cuts and tax increases needed for sustainable public finances.
Hunt is also set to make a statement in the House of Commons this afternoon, expected to be at 3pm.
The chancellor is still in line to deliver the full Medium-Term Fiscal Plan, to be published alongside a forecast from the independent Office for Budget Responsibility, on 31 October.
The move is a part of Liz Truss' fight for political survival as prominent City figures and Conservative MPs continue to call for her resignation.