Chancellor of the Exchequer Jeremy Hunt has confirmed that almost all tax measures included in the mini-budget will be reversed, though the cuts to stamp duty land tax (SDLT) will remain in place.
Hunt’s predecessor Kwasi Kwarteng, whom he replaced only days ago, had announced a series of tax cuts and abolitions in the House of Commons in September.
This included cuts to income tax and corporation tax, as well as an indefinite guarantee that the average household would not pay over £2,500 per annum in energy bills. The cuts to income and corporation tax have been reversed, and the energy price guarantee is set to remain in place only until April.
Hunt also confirmed that the government “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”.
The abolition of the health and social care levy and the changes to stamp duty are some of the only elements that will remain in place following Hunt’s policy announcement.
Industry reaction to Hunt’s announcements
“Although today’s U-turn is an attempt to calm the waters, it’s fair to say that the government’s shambolic behaviour is unlikely to distil much confidence in the UK economy,” said CEO of Alliance Fund Iain Crawford, though he added consumers will “embrace any shred of stability afforded to them in what are currently very uncertain times and the one silver lining of this latest government backtrack should be a boost to property market confidence”.
“An extraordinary turn of events, quite literally, but one that should help strengthen a property market that was starting to wobble under the pressure of increasing mortgage rates and dwindling buyer sentiment,” said an optimistic Marc von Grundherr, Director of Benham and Reeves, adding:
“While maintaining a cut to stamp duty will help stimulate buyer demand within the market, overall market health will be far better maintained by stabilising the mortgage sector and our ability to fund a property purchase in the first place.
We should now see this with pressure easing, making the threat of further mortgage rate increases over the coming months less likely.”
James Forrester, Managing Director of Barrows and Forrester, also referenced an “air of positivity”:
“It’s impossible to tell just what direction the economy will head following the latest government spectacle, but today will bring an air of positivity to what was quickly becoming a beleaguered property market.
Stability in the gilt markets will bring positive movement for those looking to borrow. But it’s important to understand that we aren’t going to return to a sub one per cent base rate and homebuyers must be prepared to pay more in mortgage costs when climbing the ladder.
However, the government’s choice to maintain the cut to stamp duty tax signals their intent to keep the property market buoyant and this should help boost buyer confidence in itself.”
Simone Webb, managing director of capital markets and finance at LiveMore, said:
“Jeremy Hunt’s speech is a huge U-turn for the government and basically puts us back to the position we were in before the mini budget. It is positive that the stamp duty cut will stay in place, but more important will be its effect on the markets. This was clearly a speech to bring a level of much-needed stability and confidence back. While interest rates were already on an upward trajectory, the level of rises we have seen in the past fortnight has outstripped most people’s ability to cope.
We all need to hope that this speech and the next fiscal statement on the 31st October will be enough to steady the markets enough that lenders can reprice and reintroduce the hundreds of mortgage products that necessarily had to be pulled due to market instability.”
