Stamp Duty cut survives new chancellor’s £32bn mini-budget climbdown

Jeremy Hunt has retained Kwasi Kwarteng’s cut to stamp duty despite junking almost the entirety of his predecessor’s controversial plan for growth just days after coming into office.

Only the stamp duty cut and the reversal of the planned rise in national insurance survived the new chancellor’s knife, with plans to reform IR35 rules for self-employed contractors shelved.

Hunt confirmed he will let corporation tax rise and said he will shelve proposals to cut income tax, while the energy price guarantee is to be reduced in scope. Hunt said the moves will raise an extra £32bn per year.

The changes to Stamp Duty, which took immediate effect from the day of former chancellor Kwasi Kwarteng’s mini budget, and are now to be retained, saw the stamp duty threshold doubled permanently from £125,000 to £250,000, and raised for first time buyers from £300,000 to £425,000. Hunt said in a statement that “We will continue with the abolition of the Health and Social Care Levy and Stamp Duty changes”, despite deciding to “reverse almost all the tax measures announced in the Growth Plan three weeks ago that have not started Parliamentary legislation.”

Lawrence Bowles, director of research at Savills, said the chancellor’s announcement was “the best feasible outcome for the housing market.”

He said: “Reversing these cuts drastically […] 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.

He also welcomed the decision to retain the cut to stamp duty, and said: “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.”

Plans to repeal the burdensome IR35 off-payroll tax rules for contractors have also been ditched, which is likely to cause consternation in the freelance-reliant construction sector. 

At the time of the change to the IR35 tax last month, Construction Products Association economics director Noble Francis said the government had cost time and money with their flip-flopping on the issue.

“The time and money wasted dealing with [IR35] in 2021, when contractors had to deal with materials availability and cost, rising PI insurance and reverse charge VAT, only for IR35 changes to be repealed, is staggering,” he said.

In a broadcast statement this morning, Hunt said the prime minister had “listened to concerns about the mini-budget” which had seen the pound plunge and the cost of government borrowing spiralling.

The scrapping of the 45% higher rate of income tax and the cancellation of the rise in corporation tax to 25% had already been announced when Kwasi Kwarteng was still chancellor, and the cut to the basic rate has now gone the same way.

Last week, one industry chief tore into the government’s abandoned plans to abolish the 45p rate of tax saying the original decision taken by prime minister Liz Truss and then chancellor Kwasi Kwarteng made the pair “look like they’re from junior school. No two sane people would have come up with such a stupid thing.”

Hunt also confirmed that the government’s “landmark” energy price guarantee would go ahead as planned but only until April, after which more targeted measures would be used.

A Treasury-led review will determine the details of this, with the chancellor saying that it “would not be responsible” to expose public finance to international energy price fluctuations in the long-term.

Hunt said that “governments cannot eliminate volatility in markets but they can play their part and we will do so” and told the public to expect “more difficult decisions on both tax and spending”, with all government department needing to find savings.

Speaking before Hunt’s announcement, Mace chief executive Mark Reynolds told the BBC: “The uncertainty [of the past few weeks] has been horrendous for most businesses. People just can’t plan for the future.”

The chancellor is set to make a full fiscal statement on 31 October – which had already been moved forward from mid-November – but said he wanted to set out his plans immediately in order to “reduce unhelpful speculation”.

He was given special permission from the speaker of the House of Commons to make a statement this morning, ahead of his briefing to parliament at 3.30pm this afternoon, as the government attempted to calm markets.