In what he called a “fiscal event” – a Budget in all but name – Chancellor Kwasi Kwarteng this morning outlined a series of measures he believes will boost growth, including what he claims are the biggest tax cuts in a generation.
Here’s the chancellor’s growth plan explained in seven bullet points.
• Income tax
The chancellor announced that he is cutting the basic rate of income tax from 20% to 19% from April 2023, a year earlier than the previous government had planned. For higher wage earners, the “additional” rate of 45% (for those paid more than £150,000) will be scrapped, with a new single top rate of income tax of 40% (for earnings above £50,270).
Currently, people in England, Wales and Northern Ireland pay 20% on annual earnings from £12,571 to £50,270. That will drop by 1% from next April. Rates in Scotland are different.
In his speech to the Commons, the chancellor said: “We will review the tax system to make it simpler and fairer,” he said, adding that “we will embed tax simplification in government”.
Labour’s shadow chancellor Rachel Reeves said Kwarteng’s statement was an “admission of 12 years of economic failure” by the government. “It is all based on an outdated ideology that says if we simply reward those who are already wealthy, the whole of society will benefit,” she added. “They have decided to replace levelling up with trickle down.”
• Stamp duty
The chancellor also announced a cut to stamp duty, which is paid when people in England and Northern Ireland buy property.
Coming into operation today, the tax-free band is being doubled from houses worth £125,000 to £250,000. And it will be raised to £425,000 for first-time buyers.
According to Kwarteng, the measure will mean that 200,000 more people will be relieved of paying stamp duty.
“For the average first-time buyer, however, the tax changes are unlikely to make a difference,” said The Telegraph. The average first-time buyer home costs £254,110, “a price which already fell below the previous £300,000 nil-rate band”.
To counter the effects of rising energy prices due to Russia’s invasion of Ukraine, the government announced three key steps: an energy price guarantee, equivalent support for businesses, and an energy markets financing scheme delivered by the Bank of England.
The total cost for this package of measures, Kwarteng said, is in the region of £60bn for the six months from October.
Source:: The Week – All news