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October 2022 – Mini Budget Update

“Eye wateringly difficult” financial challenges……

The new Chancellor Jeremy Hunt yesterday confirmed a re-write of the mini-budget of Liz Truss and Kwasi Karteng. It’s almost as if nothing ever happened – markets and Sterling have stabilised, albeit we believe this will be short lived. The easy job of cancelling the previous shock and awe approach to combat the spectre of recession has been effected, and now we will again have to focus on the reality of the situation.

Simply put, Hunt has basically taken us back to the status quo prior to the dynamic duo’s suggestions, and now has to come up with something else…. watch this space. This is all at the same time as Liz Truss’ tenureship as Prime Minister is increasingly coming under pressure, with many believing that she has only weeks left in the role before she is ousted – and she has only been in “power” for 6 weeks.

In terms of detail, Hunt said a new economic policy council was being formed to provide input to the government’s approach (with the members being senior figures from industry) and that future plans would follow Conservative values at the same time promising nothing is off the table to tackle the situation, including windfall taxes on energy companies.

The reversal of the mini budget measures will save GBP32bn and his new measures are expected to be set out on Halloween.

So, the major points of what goes:

Income Tax

The suggested removal of 45% top rate for high earners – SCRAPPED

The suggested cutting of the basic rate by 1p to 19p – SCRAPPED (the 20p basic rate will remain indefinitely now.)

Corporation Tax

The suggested cancelling of the rise from 19% to 25% – SCRAPPED (this raise initially announced by former Chancellor Rushi Sunak had been promised to be ditched by Truss and Kwarteng.)

Energy Bill Support

The suggested cap of prices for two years has been changed to last for only 6 months until next April – this is a major change and will effect heavily the net spending power of households (figures touted say on average the annual bill will now be circa GBP4k per household). Hunt has said further support will be announced, however.

Alcohol Duty

The suggested freezing of rates for 12 months – SCRAPPED  (this means beer is up by 7p a pint, a bottle of wine is up by 38p and a bottle of spirits is up by £1.35.)

VAT

The suggested tax-free shopping for non-UK visitors – SCRAPPED

And, the major points of what stays:

National Insurance

Reversing 1.25% rise – STAYS

Stamp Duty

No duty on first GBP250k of property’s value – STAYS

First time buyers

No duty on first GBP425k of property’s value – STAYS

Markets and Sterling have stabilised following the above announcement, but all eyes are now on what plans are announced at the end of the month. We still believe recession risk is high and the state of the UK economy is weak in absolute and relative terms and the hardest times are yet to come. Our view remains that Sterling will continue to be weak against the USD and that inflation will remain elevated regardless of the natural change in consumer spending as we head into a recessionary environment.

This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

Other News

Changes to the Dutch 30% reimbursement ruling confirmed

Thirty Percent SignRecent news about the 30% tax ruling in the Netherlands could have substantial implications for British expats and their financial planning and wealth management strategies.

The 30% tax ruling for expats in the Netherlands enables employers to offer working expats 30% of their salary tax-free as long as they meet certain requirements. The intended aim is to encourage highly skilled workers from around the globe to bring their expertise to the Netherlands. After all, relocating to the Netherlands is not cheap, and the tax advantage is there to help offset all the expense that comes with relocating. There are approximately 60,000 expats who currently claim the tax break.

As we reported last year, the tax break came under fire in a report published by the Dutch research bureau Dialogic for being far too generous and, therefore, costing the Dutch government too much money for it to be sustainable. When published in June 2017, the report suggested several reforms to the system, including shortening the number of years that expats could claim the tax-relief from eight years to five. This was because research carried out by Dialogic found that the vast majority of expats making use of the benefit (80%) claimed it for fewer than five years; less than 10% actually claimed the benefit for the full eight years.

Read More

End to 15-year-rule for expats

Great news for the clients of expat financial services: the government has announced proposals to abolish the 15-year time limit on the right of expats to participate in UK general elections.

The policy statement, which was published as part of document entitled “A democracy that works for everyone: British citizens overseas”, details the government’s idea of ensuring rigorous checks on the identities of expats so that they can register to vote without suspicion of fraud.

Furthermore, cost analysis performed by the government predicts that ending the 15-year rule and implementing an expat voting registration scheme will actually cost only a six-figure sum; far less than the millions of pounds some experts have previously claimed it would require.

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