October 4, 2022
UK Government updates income tax proposal from its mini-Budget
On 23 September 2022, the UK Chancellor, Kwasi Kwarteng delivered his mini-Budget and the Government's Growth Plan. The wide-ranging announcements contained in the Growth Plan were covered in EY Global Tax Alert, UK Government presents mini-Budget and Growth Plan, dated 26 September 2022.
On 3 October 2022, following various comments from across the UK political spectrum on the appropriateness of the abolition of the 45% rate, the Chancellor announced that the Government would not be proceeding with the proposal. He noted that it was "clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country." The reduction in the basic rate of income tax to 19% from 6 April 2023 and the reversal of both the Health and Social Care Levy and the associated National Insurance rise will go ahead as proposed.
In this presentation of the Growth Plan, the Chancellor promised to set out his medium-term plan for the public finances in due course. It has now been confirmed that this will take place on 23 November at which point the Chancellor will set out further details on the Government's fiscal rules, including ensuring that debt falls as a share of Gross Domestic Product in the medium term. The Chancellor has asked the Office for Budget Responsibility (OBR) to set out a full forecast alongside the plan.
There will then be a Budget in the Spring, with a further OBR forecast.
Away from tax, Cabinet Ministers will announce further supply side growth measures in October and early November, including changes to the planning system, business regulations, childcare, immigration, agricultural productivity, and digital infrastructure. As part of that program, the Chancellor is due, next month, to outline regulatory reforms to "ensure the UK's financial services sector remains globally competitive."
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United Kingdom), London
Ernst & Young LLP (United Kingdom), Manchester
Ernst & Young LLP (United Kingdom), Reading
Ernst & Young LLP (United States), UK Tax Desk, New York
Ernst & Young LLP (United States), FSO Tax Desk, New York
Ernst & Young LLP (United States), Transaction Tax Desk, New York
Ernst & Young LLP (United States), UK Tax Desk, Chicago
Ernst & Young Tax Co. (Japan), UK Tax Desk (Asia-Pacific), Tokyo