Brief summary

Friday’s statement from new Chancellor Kwasi Kwarteng has raised a number of important issues for personal finance and wider investment markets. We highlight the key points and summarise our view on the implications for investment below:

  • The national insurance increase introduced in April 2022 has been reversed with effect from November 2022; the new health and social care levy has been cancelled, with spending in this area to be covered by general taxation
  • The planned increase in the rate of corporation tax from 19% to 25%, due in April 2023, has been cancelled
  • The cut in the basic rate of income tax from 20p to 19p will be brought forward to April 2023, one year earlier than previously announced. At the same time, the additional rate of income tax (currently at 45% for income above £150,000) will be abolished
  • The increase in dividend tax rates introduced in April 2022 will be reversed from April 2023
  • The Stamp Duty Land Tax (‘SDLT’) threshold has been increased from £125,000 to £250,000, with further increases in the relief for first time buyers both in the SDLT threshold and maximum property value qualifying for relief
  • The recently introduced rules around off-payroll working (known as IFRS 35) will be repealed from April 2023, removing the responsibility of determining the employment status of contractors from firms and reinstating this responsibility with individual contractors
  • 38 local authorities have been identified as possible ‘investment zones’, areas where a package of benefits will be available to drive business growth
  • The government has announced that it remains supportive of Enterprise Investment Schemes and Venture Capital Trusts, paving the way for an extension in the tax reliefs associated with these vehicles which are currently due to end in 2025


Investment implications

This statement took commentators by surprise in the scope of the fiscal stimulus announced. The basic implication is that the vast majority of people will pay less tax than they would have otherwise done from next April. In stark contrast with the government response to the last financial crisis where austerity loomed large; this is an unashamedly ‘pro-growth’ stance from the incoming administration, focussed more on growing the size of the total pie than on altering the way in which that pie is divided

We note that there was no mention of changes to basic or higher rate tax thresholds or allowances which have remained fixed for a number of years. In the context of double-digit inflation, fixed nominal bands serve to dampen the impact of cuts to headline rates

Markets responded negatively to the announcement, with Gilts and Equities selling off hard and Sterling reaching fresh lows against the US Dollar. In another lesson around the challenges of predicting the market response to macroeconomic or policy developments, investors’ immediate reactions were driven more by concerns around how these measures would be funded than on the potential positive implications for growth



A fiscal package of this size undoubtedly presents challenges for the Bank of England as it grapples with persistent inflation. We expect the Central Bank to become firmer in its monetary tightening in response. In aggregate however, we believe that a long-term focus on growth and a reduction in the overall tax burden on businesses and individuals will be positive for the UK economy.



Risk Warnings
This document has been prepared based on our understanding of current UK law and HM Revenue and Customs practice as at 26 September 2022, both of which may be the subject of change in the future. The opinions expressed herein are those of Cantab Asset Management Ltd and should not be construed as investment advice. Cantab Asset Management Ltd is authorised and regulated by the Financial Conduct Authority. As with all equity-based and bond-based investments, the value and the income therefrom can fall as well as rise and you may not get back all the money that you invested. The value of overseas securities will be influenced by the exchange rate used to convert these to sterling. Investments in stocks and shares should therefore be viewed as a medium to long-term investment. Past performance is not a guide to the future.