Trailed since the Conservative Party announced at the start of the month that Liz Truss had been elected to be the new party leader and so the new Prime Minister, an emergency budget was delivered in the House of Commons today. Entitled ‘The Growth Plan 2022’, the 40-page document – introduced by the new Chancellor of the Exchequer, Kwasi Kwarteng – sets out the UK government’s plan to reach its economic growth target of 2.5 per cent per annum via an extensive array of tax cuts and reforms (amongst other things). At the time of writing, there is limited detail available about these tax proposals. However, the headline points to highlight at this stage include:

Corporation tax: as expected, the planned increase to the main rate of corporation tax from 19 per cent to 25 per cent, which had been due to take effect from April 2023, has been cancelled. The mechanism for doing this is not yet clear, but is potentially important: because the corporation tax rate increase has already been enacted, unless the reversal is substantively enacted before 31 December 2022, companies will still need to assess their deferred tax positions using the higher rate. The scheduled reduction to the rate of the banking surcharge from 8 per cent to 3 per cent has been cancelled, so the combined rate of tax on profits paid by banks and building societies will remain at 27 per cent (rather than the 28 per cent previously expected), although the previously-announced increase in the banking surcharge allowance to £100m will go ahead as planned.

Diverted profits tax: To maintain a 6 per cent differential as against corporation tax, the planned increase to the rate of diverted profits tax from 25 per cent to 31 per cent, which had been due to take effect from April 2023, has also been cancelled.

National insurance contributions (NICs) and the Health and Social Care Levy: a cornerstone of Truss’ party leadership campaign, the 1.25 per cent increase in NICs announced earlier this year has been reversed with effect from 6 November 2022, and the Health and Social Care Levy which had been due to come into force in April 2023 has been cancelled. A bill was introduced to the House of Commons yesterday to legislate for this.

Income tax: unexpectedly, the 45 per cent additional rate of income tax – currently levied on annual incomes in excess of £150,000 – has been abolished from 6 April 2023. From this date, there will be just two rates of income tax: the basic rate (reduced one year ahead of schedule from 20 per cent to 19 per cent), and the higher rate (maintained at 40 per cent). Current additional rate taxpayers will accordingly benefit from the £500 personal savings allowance next year. The 1.25 per cent rise in income tax on dividends originally introduced alongside the above-mentioned NICs increase has also been reversed from 6 November 2022.

IR35: in perhaps the biggest shock of the day, the IR35 reforms relating to off-payroll working have been reversed. As explained in more detail here, the result of this reversal is that ‘end clients’ in both the public and private sector will no longer be required to formally assess via a ‘status determination statement’ whether off-payroll workers would be employees had they been directly engaged, nor, if that were the case, to include such workers on their payroll and account to HMRC for income tax and NICs – such obligations will revert to resting with such workers themselves. The timing for this change – and indeed the reason for it – is unclear.

Capital allowances: the temporary £1m annual investment allowance for qualifying expenditure on plant and machinery, which had been due to revert to £200,000 in April 2023, has been made permanent.

SDLT: the nil rate band for SDLT on residential property has been doubled from today, with no SDLT now due on the first £250,000. The nil rate band for first-time buyers acquiring property with a value of less than £625,000 (rather than the £500,000 limit it was previously) has also been increased from £300,000 to £425,000. (The approach to Land Transaction Tax in Wales and Land and Buildings Transaction Tax in Scotland are yet to be confirmed by the relevant devolved administrations.)

Investment Zones: new ‘Investment Zones’ will be introduced in due course. In addition to relaxed planning restrictions, these zones will benefit from a number of time-limited tax incentives, including: (i) 100 per cent relief from business rates on newly occupied business premises (and certain existing businesses if they expand); (ii) 100 per cent first year capital allowance for qualifying expenditure on plant and machinery; (iii) enhanced structures and buildings allowance (at 20 per cent of the cost of qualifying non-residential investment per annum); (iv) zero-rate employer NICs on salaries of new employees working in the zone for at least 60 per cent of their time on earnings up to £50,270 per year; and (v) full SDLT relief for land and buildings bought for commercial purposes or for new residential developments. Early discussions have commenced with 38 local authorities on establishing such zones in their area.

Office of Tax Simplification (OTS): the OTS has been abolished, and instead HM Treasury and HMRC will be mandated to focus on simplifying the UK’s tax code. According to the OTS' statement on this announcement, this abolition will come into effect when the next Finance Bill receives Royal Assent. Ongoing OTS-led reviews should, therefore, continue as normal in the meantime.

Environmental measures: as had already been announced, green levies are to be removed from energy bills for two years as part of the Energy Price Guarantee. Beyond that, little has been announced in relation to climate change-specific tax incentives – although an independent review, chaired by Chris Skidmore MP (a member of the Environmental Audit Committee and the Minister who signed the UK's net zero target into law), into how to deliver this net zero commitment whilst maximising economic growth and investment has been launched.

OECD global tax reform: there had been speculation – based on comments from two of her supporters during her party leadership campaign – that Truss may not implement Pillar Two. However, there is nothing to indicate this in today’s announcements.

VAT: similarly, despite reports that the Chancellor would reduce the standard rate of VAT, no such policy has been announced.

Research and development (R&D): no reforms in relation to R&D have been announced, but it has been confirmed that the 2021 review into R&D tax reliefs will continue, with any further reforms to be announced as usual at a future fiscal event.

There is a lot for taxpayers – corporates and individuals alike – to reflect on in today’s announcements. There will undoubtedly be further nuances to consider once further details about these tax proposals are made available, but for now, whatever the merits, the approach taken by Truss and Kwarteng seems clear: reducing taxpayers’ tax burden is “central to solving the riddle of growth”.