In his first Budget speech as Chancellor, Kwasi Kwarteng said that ‘we need a new approach for a new era, focused on growth’. He would build this around three priorities: reforming the supply side of the economy, maintaining a responsible approach to public finances, and cutting taxes to boost growth. What followed certainly delivered on the third of these: this package has been described as the biggest tax cutting budget for half a century, following on from the earlier announcement of very substantial support for individuals and businesses coping with rising energy prices.
The Chancellor also put forward a number of proposals to reduce costs and regulation for businesses, moving the levers of tax and legislation to encourage investment, employment and economic growth. It remains to be seen whether the UK’s productivity and national income will respond in line with his aspirational target of 2.5% a year.
The other priority, fiscal responsibility, was covered in less depth. The response of the financial markets to the announcement of such substantial tax cuts was immediate: the value of the pound and the main stock market index both fell. The Chancellor put off the publication of plans to reduce government debt over the medium term, and full economic and fiscal forecasts, until later in the year.
The government is taking big but potentially risky steps to promote growth. This document describes the main measures that were announced, as well as some things that might have been announced but were left unsaid, and explains the context. If you would like to discuss what it all means for you and your finances, we will be happy to help.
Significant points
• reversal of the April 2022 increase in National Insurance rates with
effect from 6 November 2022
• cancellation of the Health and Social Care Levy that was to be
introduced in April 2023
• cancellation of the 1.25% addition to dividend tax rates that was introduced in April 2022, with effect from April 2023
• basic income tax rate cut to 19% a year early, from April 2023
• abolition of 45% rate of tax on incomes above £150,000 from
April 2023
• cancellation of planned corporation tax increase to 25% in
April 2023: the rate will remain 19%
• increases in thresholds for Stamp Duty Land Tax with immediate effect
• from April 2023, repeal of the ‘off-payroll working’ measures introduced in 2017 and 2021
• confirmation of energy cost support packages
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