Kwasi Kwarteng has scrapped the top rate of income tax and slashed stamp duty in a £45bn package of tax cuts to spur growth.
The Chancellor revealed at his mini-Budget that the basic rate of income tax will be cut from 20pc to 19pc next year, while first-time buyers will benefit most from the stamp duty cut. He also confirmed new investment zones to boost business spending and announced that households will benefit from the reversal of the National Insurance rise from November.
He said in Parliament: "We are determined to break that cycle. We need a new approach for a new era focused on growth.
"Our aim, over the medium term, is to reach a trend rate of growth of 2.5pc and our plan is to expand the supply side of the economy through tax incentives and reform. That is how we will deliver higher wages, greater opportunities, and fund public services, now and into the future."
Here are all the key points from Mr Kwarteng's speech:
- The Chancellor has abolished the top rate of income tax and will cut the basic rate from 20pc to 19pc from April 2023. From next year, the UK will have a single higher rate of income tax of 40pc with the additional rate of 45pc scrapped.
- Mr Kwarteng announced that the planned increase in corporation tax from 19pc to 25pc next year has been cancelled.
- He also confirmed that the 1.25 percentage point increase in National Insurance will be scrapped from November. The Chancellor said this would save workers on average £330 per year.
- Mr Kwarteng also announced a huge stamp duty cut. Homebuyers will not buy stamp duty on the first £250,000 of the property's value, instead of the current level of £125,000. First-time buyers will not pay stamp duty up to £425,000, up from £300,000.
- While the Office for Budget Responsibility will not publish new forecasts based on the changes, the Treasury has released its own costings. In total, the tax cuts will cost £27bn next year and £45bn by 2026-27. By that point, scrapping the additional rate of income tax will cost £2bn while cancelling the corporation tax hike will deliver a £19bn blow to the Exchequer.
- The Office of Tax Simplification - an independent body advising the Chancellor on tax - will be wound down.
- Planned increases in the duty rates for beer, cider, wine and spirits will be cancelled.
- The Chancellor announced the Government will liberalise the planning process to help speed up investment. "We are getting out of the way to get Britain building," he said.
- Mr Kwarteng said the reforms will unpick the "complex patchwork of planning restrictions and EU-derived laws that constrain our growth".
- He also announced new investment zones that will lure in businesses to almost 40 areas through relaxed planning rules and tax breaks on national insurance, investment, stamp duty and business rates.
- He said reforms of the pension charge cap will unlock pension fund investment while £500m will put to support "new innovative funds" to boost investment in science and tech.
- The Annual Investment Allowance, a tax break on investments in plant and machinery, will remain at £1m rather than falling to £200,000. Mr Kwarteng also extended schemes aimed at increasing investment in startups beyond 2025, including the Enterprise Investment Scheme.
- The Chancellor announced that the bankers' bonus cap will be scrapped while trade union rules will be toughened up.
- New laws will require unions to put pay offers to a member vote, ensuring that strikes are only called once negotiations have "genuinely broken down", he said.
- A recent shake-up to the tax rules for off-payroll workers will be repealed while Mr Kwarteng confirmed measures to encourage more people into the labour market. Benefits will be cut for people that "don’t fulfil their job search commitments" and 120,000 workers on Universal Credit will have their benefits reduced unless they seek more and better paying work.
- Mr Kwarteng laid out details of the previously announced energy support for households and business.
- The Energy Price Guarantee will cap the unit price that consumers pay for electricity and gas, limiting the average household bill to £2,500.
- The Energy Markets Financing Scheme will provide loans to cash-strapped energy suppliers while businesses will benefit from a discount on their bills.