Interactive Investor

Jeremy Hunt scraps tax cuts: winners and losers

17th October 2022 16:02

by Alice Guy from interactive investor

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As new chancellor Jeremy Hunt bins Kwarteng's mini-budget, we examine what cancelling the tax cuts will mean for your mortgage, investments, energy bills and finances.

Chancellor Jeremy Hunt 600

It’s been a crazy few weeks for the UK economy and government. There have been more U-turns than a dodgy sat-nav and it’s left many of us feeling disorientated and slightly queasy about our finances and investments.

This morning new chancellor Jeremy Hunt, now dubbed the most powerful man in government, performed a spectacular one-eighty, shredding Kwasi Kwarteng’s controversial September mini-budget and cancelling nearly all the tax cuts previously announced.

Just when will the bottle stop spinning and what does the latest set of tax announcements mean for our finances? Let’s dive in and take a look at the winners and losers from the latest tax U-turn.

Balancing the books

This morning Jeremy Hunt announced that he would reverse most of Kwarteng’s planned tax cuts, saving the government an estimated £32 billion. It was too late to reverse cuts on National Insurance and stamp duty which were already under way. 

Just a few weeks ago, things were very different, and the prime minster was in buoyant mood. Previous chancellor Kwasi Kwarteng set out his mini-budget in September containing around £45 billion worth of tax cuts, including cutting National Insurance, income tax and stamp duty. Unlike most budgets, there was no supporting Office for Budget Responsibility (OBR) forecast and there was no attempt to balance the books: the cuts were financed by yet more government debt.

The biggest unknown was a huge two-year energy support package, where the final cost would depend on wholesale energy costs during the next two years.

The markets were unimpressed and reacted by sending the pound and UK government bonds tumbling.

In the following weeks, the Bank of England intervened several times to prop up gilt prices as a doom spiral threatened to engulf some pension funds: they faced liquidity problems as gilts prices collapsed.

And the pain didn’t stop there. Gilt prices are intrinsically linked to mortgage rates and a rise in gilt yields made interest rate rises more likely. Mortgage lenders began to pull cheaper products and householders faced eye-watering mortgage bills.

The market reaction proved Kwarteng’s downfall and Jeremy Hunt stepped into the breach as the new chancellor last Friday.



One of the biggest winners from Hunt’s U-turn could be investors as they would benefit if his plans successfully calm market volatility.

The fallout from Kwarteng’s un-costed spending plans indirectly affected investors’ wealth as market confidence ebbed away. UK share prices fell further and the pound dropped to its lowest level in recent years.

The scrapping of most planned tax cuts, saving the taxpayer an estimated £32 billion, will pour oil on the troubled waters of the stock market. The FTSE 100 rose on Friday, on rumours of a planned U-turn and then further on Monday after Jeremy Hunt’s formal announcement.

Victoria Scholar, head of investment at interactive investor, said: “The markets are responding positively to the new chancellor’s plans to reverse almost all the tax cuts announced by his predecessor Kwasi Kwarteng in the mini-budget. Jeremy Hunt’s focus on reassuring the markets and reinstating confidence appears to have worked with gilt yields trading lower and sterling pushing higher.

“The FTSE 100 is staging gains, inching higher as Trussonomics is unwound with the reversal of the biggest tax cuts in 50 years. Although we heard about Hunt’s tax plans, the market will have to wait until 31 October to learn about where he plans to cut government spending in order to plug the multi-billion pound shortfall that remains.”

Wider economy and inflation

The mini-budget package was aimed at stimulating growth by cutting taxes and letting workers and business keep more of their money. All well and good, but it led to fears that runaway inflation would engulf the UK as people having more money to spend forces prices higher. The falling pound also put further upward pressure on prices as imports into the UK cost more.

In contrast, Hunt’s plans to reduce government spending should have a dampening effect on inflation as fiscal tightening means there is less money in the economy.


Mortgage-holders have seen many products pulled in recent weeks and anyone nearing the end of their current deal is facing a hefty rate rise. Getting the economy and markets under control should put downward pressure on interest rates, and mean that sky-high interest rate rises are less likely.

Victoria Scholar said: “The retreat in yields and sterling’s appreciation should help to settle the mortgage market and offset some of the UK’s imported inflationary pressures, possibly leading to a need for less aggressive interest rate increases from the Bank of England at its next monetary policy committee meeting at the start of November.”


Workers and households

Energy price cap: Kwarteng’s energy price cap could be scrapped in April 2023 as Hunt announced a formal review of the price cap from April onwards. The previous plans would have guaranteed energy prices for two years up until October 2024.

Ending the £2,500 price cap in April could lead to huge bill rises of at least £1,000 an average household, based on current prices. The actual costs could be a lot higher as energy prices fluctuate based on wholesale energy prices and the ongoing war in Ukraine continues to put upward pressure on gas prices.

Hunt suggests that there may be more targeted support for the poorest households after April.

Income tax: income tax will remain at the current levels and the planned cut to basic-rate income tax from 20% to 19% will not go ahead. This cut would have given someone earning £30,000 an extra £174 per year.

Tax thresholds are due to remain the same, so fiscal drag and high inflation will still leave most taxpayers feeling poorer.

Last week, Kwarteng also announced that the 45% additional rate of income tax would continue and not be scrapped as previously planned. These changes won’t apply to Scottish workers who have their own income tax system.


Investors will lose out as the rise in dividend tax has been reinstated. The 1.25 percentage point increase in the dividend tax was due to be reversed next April.


Energy support: just like private households, business owners could now face huge energy bill increases in April if the energy cap is scrapped.  

Corporation tax rise: Hunt confirmed that corporation tax will rise to 25% in April 2023 as originally planned by Rishi Sunak, costing a business with taxable profits of £2 million around £120,000 per year.

No change

Stamp duty: Kwarteng’s stamp duty cut will be unchanged as it has already happened. The tax-free threshold has been raised from £125,000 to £250,000 for house-buyers in England and Northern Ireland. First-time buyers will pay no stamp duty on houses worth up to £425,000, rather than a previous £300,000.

National Insurance: Rishi Sunak’s previous 1.25% National Insurance hike will still be scrapped on 6 November as planned, bringing National Insurance down from 13.25% and 3.25% to the previous levels of 12% and 2%. This will save someone earning £50,000 around £468 per year.

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