JEREMY Hunt tore up his predecessor’s mini-Budget in a bid to help stabilise the UK economy.
The new Chancellor announced his plans on Monday and presented them to the House of Commons.
2Jeremy Hunt delivered his economic statement earlier this morningCredit: PA
The announcement was dramatically brought forward after a torrid weekend for the PM, as MPs are openly plotting how to force her out.
In a bombshell statement, Jeremy Hunt tore up Kwasi Kwarteng’s mini-Budget – leaving only a handful of new policies on the table.
Liz Truss and Jeremy Hunt met over the weekend to hammer out the details.
The Chancellor has since, scrapped the hike to income tax, and reduced household energy bill protection whilst ditching planned duty cuts on beer, cider, wine and spirits.
Jeremy Hunt stopped short of scrapping the cuts to National Insurance contributions and stamp duty.
But the U-turns have come in thick and heavy in a bid to prove to the markets that the government is still fiscally responsible.
Follow the latest developments on Jeremy Hunt’s statement here….
The markets have already reacted positively to the news after several weeks of turbulence.
Here are the major announcements and key policy U-turns from Jeremy Hunt’s statement you need to know.
Income tax cut scrapped
Millions of households will miss out on savings from a 1p cut to the basic rate of income tax next year.
The one penny off income tax which was scheduled to take place from April 2023, has now been scrapped.
Around 31million people were set to save £170 on average, and up to £377 for the highest earners.
But Jeremy Hunt has confirmed that the cut to income tax won’t take place next year and the basic rate will remain at 20% “indefinitely”.
Energy bill freeze to end sooner
Energy bills were initially set to be frozen at £2,500 for the typical household for two years, but now the guarantee will only last until April.
After then, help will be targeted to help hard-up households, although details of this were not revealed today.
It could mean millions will see their energy bills soar once the guarantee is up.
Mr Hunt said a Treasury-led review on how energy bills will be supported after April will be launched.
He said it “would not be responsible” to carry on the cap after that considering the “volatility” of the energy market.
The Energy Price Guarantee is a cap just on what firms can charge customers for each unit of gas and electricity.
This means that your bill could be higher depending on how much energy you use – so if you use more, expect to pay more.
The Prime Minister’s initial plan was due to save the average household around £1,000 a year, and protects billpayers from further expected rises over the coming months – but future savings now remain uncertain.
Alcohol duty cut scrapped
Beer, cider, wine and spirits will go up in price after the Chancellor reversed duty cuts today.
Just weeks ago, Kwasi Kwarteng had binned planned hikes to duty rates for beer, for cider, for wine, and for spirits.
But as part of plans to raise £32billion of cash and help stabilise the markets, that will not go ahead as planned.
Alcohol duty rates will rise in line with RPI – the retail price index – but they were going to be frozen.
Alcohol duty usually rises in line with the Retail Price Index of inflation, which currently sits at 12 per cent – the highest since the 1980s.
It will save the Treasury around £600million this year – with the freeze to last a year.
It’s likely to be the equivalent to 7p on a pint of beer, 4p on a pint of cider, 38p on a bottle of wine and £1.35 on a bottle of spirits.
IR35 tax rules to stay
The government will no longer repeal the 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) from April 2023.
The IR35 tax scheme hits self-employed workers who have set themselves up as private companies.
This includes self-employed workers like delivery drivers, building contractors and many others who mainly work for other businesses that are not on the payroll.
Under the current IR35 system, the business that you work for, rather than yourself, is responsible for deciding your tax status.
It can often mean self-employed workers can pay unnecessary costs.
However, IR35 rules will remain and the move will cut the cost of the government’s Growth Plan by around £2 billion a year.
Dividend rate cut axed
A 1.25 percentage point rise to dividend tax which came in from April this year will continue.
Former Chancellor Kwasi Kwarteng had promised to abolish the additional rate applying to dividend income.
It was set to be scrapped from next year, in April 2023.
But Mr Hunt said today that the 1.25 percentage point rise will remain in place, saving £1billion a year.
VAT-free shopping for international tourists scrapped
The new Chancellor also scrapped the plans for new VAT-free shopping for international tourists.
When shoppers buy products they pay a number of taxes on them, such as VAT.
These taxes are already factored in to sales prices – so you might not realise they are there.
Duty free makes products cheaper by removing local taxes, with the expectation the purchase will leave the country.
Tourists used to be able to able to claim back VAT at the airport or rebate agencies.
But Rishi Sunak removed this when he was Chancellor.
Ex-Chancellor Kwasi Kwarteng announced he was bringing back the tax rebate – but those plans have been reversed again.
National Insurance cut to go ahead
Millions of hard-up households are set for a £330 pay boost within weeks as the National Insurance cut will still go ahead.
Scrapping the National Insurance hike is one of only a few policies that has survived, as Liz Truss attempts to save her premiership.
Around 28million workers across the UK are set to keep an extra £330 a year on average.
The exact amount that you will save will depend on how much you earn.
Stamp duty cut remains
Thousands of homebuyers are still set to save up to £6,250 as a cut to stamp duty will stay in place.
Stamp duty land tax (SDLT) is a lump sum payment you have to make when purchasing property over a certain threshold.
Under the previous system, no stamp duty was paid on the first £125,000 of any property purchase.
The government doubled that in last month’s mini-Budget – to £250,000 – for all home purchases.
The threshold at which the duty was paid for first-time buyers was £300,000. But this increased, to £425,000.
It comes after Prime Minister Liz Truss was forced to U-turn on her commitment to drop the planned rise in corporation tax from 19% to 24%.
Ms Truss also scrapped plans to drop the 45p top rate of income tax after the pound plummeted and government borrowing costs soared.