Today’s post addresses the usual assumptions ahead of the Mini Budget in September 2022 and what actually happened.

Mini-budget 2022

I’ve lost count of how many Tory budgets we have now (as well as Tory prime ministers and Tory chancellors), but without getting in the way of Tory policy.

  • Maybe this time things will be different.

This is already the sixth budget of this parliament, which now has a little more than a couple of years left.

  • Strictly speaking, this is a financial event often referred to as a mini-budget – this terminology allows the chancellor to avoid ordering official forecasts in the office Budget Responsibility.

The idea is that the OBS surprise means a financial event could happen near the end of the Tory leadership campaign.

  • We will probably get the truth too budget in November.

New Prime Minister Liz Truss and new Chancellor Kwasi Kwarteng need to make an impact quickly, and they arrive in less than promising circumstances:

  • The fight against Covid cost a lot of money (and Boris’s political career)
  • Liz has already announced energy price cap which threatens to cost even more
  • We have skyrocketing inflation (mostly caused by the energy shock here in Europe, so maybe a price cap will help and save the govt interest to download)
  • Interest rates rise to fight inflation, but collateral damage can include recession, high unemployment, and lower prices for risky assets

The tabloids are wrapping it all up in a “cost of living crisis” and calling on the government to insulate households from its effects.

  • Liz believes (and I agree) that the only real solution is to grow the economy.

But whether it can be done and how best to achieve it are more difficult questions.

At some point, all of these costs will have to be paid for, and if we need tax cuts to grow, then maybe we should also talk about how best to downsize.

  • Unfortunately, all spending cuts are now labeled austerity and the hopelessly inefficient NHS is still seen as a national religion.
  • To this was added the second untouchable doctrine – Net Zero.

So what do the media think Kwasi will announce?


Remember that much of the speculation associated with investment blogs is created by investment firms and accountants to provoke action (overreaction?) from clients and investors in the face of draconian measures that rarely occur.

  • This rule may not apply to this budgetas this time we expect a tax cut of perhaps £30bn.

Notes in blue show what actually happened, which for most budgets is much less than predicted.

Income Tax and NIC

Liz advocated repeal NIC the increase formerly known as the Health and Social Security tax.

  • The higher NIC The threshold introduced for tax increases is expected to remain.

What we don’t know at this point is the timing of the cancellation (or whether it could even be retroactive).

The associated increase in tax on dividends also goes for broke.

  • It happened as expected.

Another option is to expand the spousal allowance, which allows a high-earning spouse to use a portion of a partner’s tax-free personal allowance.

  • It is currently capped at £1,250 for basic rate payers only, but Lisa has hinted that she wants to make all the allowance transferable.

There was no mention of it.

The previous chancellor, Rishi Sunak, announced a 1% cut in the base rate. income tax from 2024, so it was always possible that it could be postponed.

  • And there was a discussion about a higher rate income tax the threshold could be increased from £50,270 to £80k (which would be in line with the growth program – see below).

A 1% cut in the base rate will take place in April 2023, but the higher rate threshold is unchanged.

  • The surprise was that the additional rate of 45% on income over £150,000 was abolished (from April 2023).
Cost of living

A big step here is capping energy prices.

  • We already know how it will work for households, but we can get more details on the plan for businesses.

We also have to work out how the scheme will be paid for (eventually).

  • Windfall tax for energy companies is excluded.

VAT has already been removed from domestic electricity bills as part of the cap, but a more general reduction in VAT, likely to be a new rate of 15%, has previously been mooted.

  • There has been no reduction in VAT and we do not know how the energy limit will be financed in the long term.

There are speculations that Kwasi will set an economic growth target of 2.5% per annum and outline some measures aimed at achieving it.

  • One option is low-tax, low-regulation investment zones (kind of like corporate zones a few decades ago).
  • Removing the cap on banker bonuses is another option.
  • Fiscal rules that require the national debt to start falling between 2024 and 2025 could also be scrapped (or, more likely, extended).

Investment zones have been announced, but at the moment it is no more than a concept – discussions are underway with 38 councils.

Capital gains and inheritance tax, wealth taxes

The only speculation here related to unspecified changes to the IHT regime.

Corporate tax

In April 2023, corporation tax was due to rise from 19% to 25%.

  • Kwasi was expected to freeze the tax at 19%.

As mentioned above, the windfall tax for energy companies is excluded.

  • It was also about possible changes in tariffs for business.

The corporation tax hike was reversed, but there were no other announcements.

Investments and pensions

The main point here was expected to be the reinstatement of the triple lock on the state pension (a similar one was removed last year due to the big post-Covid wage rebound, but Sunak confirmed it would return this year).

  • In the press, this will seem controversial because inflation is currently very high, but keeping SP with inflation is one of the things triple locks are supposed to do.

No other changes in the pension system (for example, the abolition of social security) were expected.

  • The only change to pensions was to raise the levy cap so that pensions could invest in (expensive) illiquid assets.

Nothing major was expected for the ISA, VCT or EIS, although as part of the growth initiative the latter two could be incentivized to invest more in UK start-ups (now that we are outside the EU).

  • They are also subject to sunset clauses in 2025, so it was possible that their continuation could be confirmed.

The 10-year SEIS scheme limits were updated and government support for EIS and VCT was confirmed.

Some have called for penalties for withdrawing from LISAs under the age of 60 to be reduced or abolished.


There were speculations that the stamp duty on the purchase of real estate could be reduced, but there were no details.

  • There was a token cut, with the nil tax band increasing from £125,000 to £250,000, as well as some help for first-time buyers, but the higher rate bands were not affected.
Green things

Green charges have been removed from domestic electricity bills as part of energy price caps.

  • Some details on the path to UK Net Zero commitment were also awaited.

I didn’t notice any

Sin taxes

Fuel duty may be reduced to combat COL.

  • It was not, but the duty on alcohol was frozen.

The only thing I have noticed is a rollback of IR35 to the original setup where the contractor (rather than the employer) assessed the applicability of the law to each contract.


It was a very big package of tax cuts (£45bn excluding the energy price cap) but again I’m disappointed with the Tories budget.

  • A 1% discount on the base rate and a 2% discount on network cards, as well as the retention of 19% corporate tax, are all welcome, but not quite a game-changer.

The abolition of the 45% rate could be replaced by a 20% band extension to £80k or £100k a year.

  • And doing away with the LTA (and/or the annual contribution limit) would be a much better incentive for individual businesses.

The stamp duty cut is particularly vexing – it cuts the duty on a property worth £1 million from £44,000 to £42,000, and on a house worth £2 million from £154,000 to £152,000.

  • So it won’t make any difference to the top end of the market.

Until next time.

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