Hunt reveals U-turn on all the mini-budget policies – except stamp duty

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Chancellor Jeremy Hunt has announced that the government will reverse almost all the tax measures announced in its recent growth plan.

While it will still go ahead with cutting stamp duty, a planned 1p cut to the basic rate of income tax will now be shelved “indefinitely” while the energy price guarantee will be watered down. 

Help with energy bills was due to apply universally to every household for two years but Hunt says this will only last in its current form until next April. 

The Treasury will now conduct a review to study how best to provide targeted support to households and businesses beyond that time.

In a special broadcast, the Chancellor explained: “Whilst we will continue with the abolition of the health and social care levy and stamp duty changes, we will no longer be proceeding with the cuts to dividend tax rates, the reversal of off-payroll working reforms introduced in 2017 and 2021, a new VAT-free shopping scheme for non-UK visitors or the freeze on alcohol duty rates.”

Income tax U-turn

He said it was not right to borrow to fund the income tax cut, which would have reduced the rate to 19%. 

Last week, Liz Truss performed another humiliating U-turn by announcing she would not cancel the scheduled rise in corporation tax from 19% to 25% next year. The Prime Minister’s stamp duty cut was also universally panned by mortgage brokers who labelled it a catalyst for stimulating an overheated property market. Then chancellor Kwasi Kwarteng raised the threshold before stamp duty is paid to £250,000 and for first-time buyers, to £425,000.

The Chancellor, who is a landlord, will deliver the full Medium-Term Fiscal Plan to be published alongside a forecast from the independent Office for Budget Responsibility on 31st October.

Reaction

Nathan Emerson, CEO of Propertymark, which represents UK estate and letting agents, says: “The Chancellor’s commitment to the Stamp Duty thresholds that better represent house prices will certainly help to restore some market stability and confidence which has taken a hit.

“Mortgage rates were already rising and we hope the wider announcements made today will translate into a settling down of that trajectory so buyers can proceed with more confidence that some of those additional lending costs will still be offset by Stamp Duty savings.”

Lawrence Bowles, director of research at Savills, comments: “In many ways, the Chancellor’s announcement this morning was the best feasible outcome for the housing market.

“Almost all of the tax cuts announced in the Truss/Kwarteng “mini” Budget three weeks ago have gone. Even measures that had been announced previously, such as the 1p cut to the basic rate of income tax, have been shelved.

“Reversing these cuts drastically reduces the size of the financial black hole the Government has to clamber its way out of. That should reassure global financial markets that the UK remains a safe place to invest, bringing gilt yields down.

“This, in turn, will reduce the need for the Bank of England to hike base rates. It means we can expect to see mortgage rates peak lower and fall faster once we pass peak inflation.

“But some tax changes remain: most pertinently, the cut to stamp duty. This cut means home movers and investors could save up to £2,500 on home purchases. First-time buyers could save up to £11,250.

“While these sums may not be enough on their own to encourage someone to move, they may give a push to any households sitting on the fence. In particular, households facing the prospect of remortgaging may take advantage of the stamp duty cut to move – their mortgage costs are going up either way, after all.

“It may be a long time until we see mortgage rates back to where they were in recent years. But, for now, we do expect to see some of the existing downward pressure on house prices and transactions to be tempered – if only a little.”

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