CHANCELLOR UNVEILS BIGGEST TAX CUTS IN 50 YEARS

The Chancellor Kwasi Kwarteng announced major tax cuts in his much-anticipated ‘mini Budget’, cutting income tax rates and halting proposed increases to National Insurance and other taxes and duties.

From April 2023, the basic rate of income tax will be cut to 19p, while the highest rate of 45% will be abolished at the same time. The top rate will then be 40%.

On other moves, Kwarteng scrapped the recent hike in National Insurance Contributions. NIC rates will be cut by 1.25 percentage points for employees, employers and the self-employed, effectively reversing the uplift introduced in April 2022 for the rest of the tax year. This cut will take effect from 6 November 2022 and it will cover Class 1 (both employee and employer), Class 1A , Class 1B and Class 4 (self-employed) NICs.

Furthermore, the ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 will also not now go ahead.

Also scrapped is the proposed Corporation tax rise, which had been due to rise from 19% to 25% under plans drawn up by previous Chancellor Rishi Sunak.

He also announced a cut to the Stamp Duty tax in England and Northern Ireland, raising the threshold of how much a property has to cost before stamp duty is paid to £250,000. First time buyers currently pay no stamp duty on the first £300,000, that will be raised to £425,000.

Other Measures Include 

• VAT-free shopping for overseas visitors is to be introduced.
• The Office of Tax Simplification is to be abolished, with the Chancellor saying “all his officials will have to focus on tax simplification”.
• Forty new ‘investment zones’ will be set up in England, offering business tax breaks and more relaxed planning rules.

The mini Budget comes in a week when the government unveiled measures to help businesses with energy bills this winter. Rates will be capped at 21.1p per kWh for electricity and 7.5p per kWh for gas. Green levies have also been removed for the duration of the scheme which is currently set at six months. It is estimated to cost £60bn.

Added to that, the measures announced in Kwarteng’s mini Budget are set to cost £45bn, equivalent to 2% of GDP, said the Institute of Fiscal Studies. It is the biggest tax cutting move since Conservative Chancellor Anthony Barber’s Budget of 1972, 50 years ago.

Furthermore, the Bank of England (BoE) has again increased interest rates, from 1.75% to 2.25%, a 14-year high.