Mini-budget: tax cuts for millions will be unveiled

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By Ben King
Business Journalist, BBC News

commuterssource of images, Getty Images

Chancellor Kwasi Kwarteng will later unveil a mini budget with national insurance and corporation tax cuts.

Details of reductions in other taxes such as stamp duty could also be announced as the government tries to limit the impact of soaring energy bills on households.

Experts expect this to be the biggest tax cut event in 34 years.

Labor said financing these tax cuts through borrowing would allow people to pay for longer.

However, the government hopes the tax cuts will stimulate the economy, raise its revenue and prevent a massive increase in the national debt.

What could be in the mini-budget?

The government has confirmed that it will let people keep more of their income by cutting National Insurance (NI).

Other measures could include:

  • scrap a planned increase in the amount of tax companies pay on their profits
  • possible reductions in other taxes, including stamp duty who gets paid on house purchases
  • end of the cap on bankers’ bonuses
  • tighten the rules around universal credit
  • plans to boost economic growth, such as the creation of low-tax zones around the UK

The announcements will be made by the new Chancellor Kwasi Kwarteng, in charge of public finances.

The tax cut plans being considered could cost at least £30bn.

Will there be a reduction in stamp duties?

There is speculation the government could reduce stamp duty, a tax paid when people buy property in England and Northern Ireland.

No tax is paid on transactions up to £125,000, and from there it increases in increments to a maximum of 12% for the part above £1.5 million. It raises around £12 billion for the Treasury.

The government is believed to be considering a reduction, to help first-time buyers and relocations, which would boost economic growth, according to the Times newspaper.

How will National Insurance change?

NI was to revert to its old rate from April 2023 – to be replaced by a new Health and Social Care Levy at the rate of 1.25%. The direct debit will no longer be introduced.

The NHS will still receive the promised funding, but the government should now To borrow money rather than increasing the tax.

High earners will benefit the most because they pay the most NI. A reduction in the NI will not help pensioners or people with low or low incomes because they do not pay tax.

What other announcements are expected?

This tax is based on the annual profits made by a company.

However, Ms Truss is set to reverse the hike.

These charges fund programs such as insulation and renewable energy.

The Prime Minister has promised to temporarily scrap levies, saving households around £150 each.

A possible reduction in the main personal income tax could also be considered.

Mr Kwarteng is expected to announce a welfare overhaul to ‘get Britain back to work’.

This should include Universal Credit, a benefit paid to people of working age.

How does the government intend to revive growth?

The mini-budget could also see the end of the ceiling bankers bonus. This was introduced across the EU in 2014 (when the UK was still a member) following the global financial crisis. Under current rules, a banker’s bonus cannot exceed his annual salary – unless shareholders agree.

Asked if she would be happy to see bankers get bigger bonuses, Ms Truss said she wanted to see a growing economy.

The government could also announce the creation of “special investment zones”. Some places might be allowed to relax planning rules and reduce business taxes to encourage investment.

Can the UK afford to tax less and borrow more?

Critics, including Ms Truss’ Tory leadership rival Rishi Sunak, say immediate tax cuts will force the government to borrow more.

The money, plus interest, will eventually have to be repaid by taxpayers.

However, Ms Truss argues the tax cuts will help the economy grow – bringing in more money that will cover the cost of the amount borrowed.

Why are we talking about a mini-budget?

Major tax and spending decisions are normally made twice a year – in a fall budget statement and a spring statement.

The Office for Budget Responsibility (OBR) – which provides independent advice to the government – normally publishes its own analysis of such statements. It defines the cost of new policies, the amount of taxes that will be increased and what this means for the economy.

However, the government refuses to release the OBR assessment together with the mini-budget.

The Treasury said there “remained[s] committed to maintaining the two usual forecasts in this financial year, as it should”.

An update on the timing of the next OBR forecast will come during Friday’s statement.

A full budget is expected later this year, but no date has been set.

What are your questions about the cost of living crisis? What would you like to know about the Chancellor’s mini-budget? Email your questions to: [email protected].

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