The 1p cut in the base rate of income tax has been reversed "indefinitely" under new chancellor Jeremy Hunt's fiscal statement, announced today.
The cut in basic pay from 20p to 19p was due to come into force in April 2023. However, in his speech today Hunt said that any cut to income tax will "only take place when economic conditions allow for it and a change is affordable". The reversal is expected to save the government around £6 billion a year.
Elements of the fiscal statement, scheduled for the 31st October, have been announced early following Hunt's replacement of Kwasi Kwarteng, who was sacked last Friday after less than six weeks in the role.
Hunt has now confirmed that "almost all" the tax changes announced in last month's mini-budget will be reversed.
He said: "We will no longer be proceeding with the cuts to dividend tax rates, the reversal of off-payroll working reforms, the new VAT-free shopping scheme for non-UK visitors or the freeze on alcohol duty rates."
Together, the reversal of the previously-announced tax measures will raise an extra £32bn per year for the Treasury.
Hunt stated that there will be "more difficult decisions to take on both tax and spending" and is expected to announce further changes to fiscal policy on 31st October.
However, the cut to National Insurance and the recent cuts to stamp duty will remain unchanged, having already started parliamentary legislation.
The changes follow widespread criticism of the measures announced in Kwarteng's ‘mini-budget’ last month, which included the removal of the 45% higher rate tax for high-income earners, later reversed after the decision caused volatility in financial markets.
Last Friday, Prime Minister Liz Truss also announced that corporation tax will rise to 25% next year, a U-turn on former chancellor Kwarteng’s announcement in his mini-budget.
The government previously pledged to keep corporation tax at 19%, reversing then-Chancellor Rishi Sunak’s plan to increase corporation tax to 25% earlier this year.
