What might we see in the 'Mini-Budget Mark 2'?

25 November 2022
This Halloween, taxpayers will be hoping the chancellor has treats, rather than tricks, to share in his ‘Mini-Budget Mark 2’. Uncosted surprises are most certainly not the order of the day and the complete about-turn in economic strategy means we can expect a much more cautious approach to be taken by Mr Hunt in his announcements. This, of course, assumes the new prime minister does not dispose of his services and scrap the whole event, appointing a fifth chancellor in four months. The premier league manager ‘sack race' has been struggling to keep up with the pace of change set by the treasury.

Assuming the big event does go ahead, what new announcements might we see?  

Windfall taxes and bank surcharge

There remains a sizeable hole in the public finances from the winter energy support scheme announced in the early days of Ms Truss’s administration. The chancellor may have longer term aspirations to lower the country’s tax burden but in the immediate term, it seems clear he desperately needs to raise additional tax revenue to balance the books. 

There are limited avenues left for the chancellor to explore in generating tax revenues. With Ms Truss departing 10 Downing Street, so too does the political barrier she placed in front of introducing a windfall tax. The chancellor has already noted to parliament that he is not in principle against windfall taxes if indeed there is a genuine windfall. We could therefore see an extension of either the existing energy profits levy, or perhaps an expansion of the revenue cap measures previously announced for generators of power from low-carbon technologies. The details of the revenue cap are still to be consulted on so it’s unlikely that full details of the cap will be announced any time soon.

Another route available to Mr Hunt is to perform a U-turn on another chancellor’s previous announcements, the 5% cut to the bank surcharge brought in by Mr Sunak during his time at the treasury. This previously announced cut was to counterbalance the increase in the rate of corporation tax. The bank surcharge is currently set at 8% and was due to fall to 3% following Mr Kwarteng’s first and only fiscal statement from April 2023. It is possible we could see the 8% charge remain in place and effectively increase the rate of corporation tax on bank profits to 33%.

Corporation tax

With the pips already having been squeezed on companies, Mr Hunt may instead take the well-trodden path of capital allowance reform to encourage investment. My colleague Thomas Dews explores this option in more detail in his article this week and how Mr Hunt may use Rishi Sunak’s tax plan as inspiration.

Capital gains tax

It has been an ominously quiet few months for capital gains tax (CGT). Following a couple of years of persistent rumours that the main rate of CGT may be increased, that conversation seems to have died down.

The challenge with attempting to increase revenue from CGT is that changes to rates and reliefs can distort taxpayer behaviour, with some individuals choosing to retain assets sitting on large capital gains, rather than sell them as a result. Ultimately, it seems unlikely that the chancellor will increase the rate of CGT but it might be in his interest to flag this as an area for consideration. Deliberate silence on the topic of CGT rates has helped to encourage individuals in recent years to sell early and effectively bank the current rate of CGT before it potentially increases. 

If there is to be an announcement on CGT, it could be related to the rules which eliminate the tax on capital gains that often occurs when someone holds an asset on death. This generally allows estates to pass on assets to the next generation free from any CGT and there have previously been recommendations for this treatment to be scrapped.

Income tax

The chancellor has quickly identified that the proposed cut in the basic rate of income tax from 20% to 19% is not something that the government can afford right now. A more cost-effective solution would be to unfreeze the personal allowance and increase this again. Currently, the personal allowance starts to taper to nil for those with incomes in excess of £100,000 so such a route would mean those with large incomes would not be able to benefit from this.

If the chancellor were to be bold then he could announce a consultation on how to harmonise both income tax and national insurance, consolidating them into a single tax and simplifying the system considerably.


There could well be further announcements made, such as more detail on how investment zones will operate in practice, but the chancellor is likely to have one eye on the budget in spring next year and may hold back any good news for taxpayers until then, by which point the new prime minister should hopefully be well established in the role.