What can we expect from the changes?

by | Sep 22, 2022 | Politics

By Ben KingBusiness reporter, BBC NewsImage source, Getty ImagesChancellor Kwasi Kwarteng will later unveil a mini-budget with National Insurance and corporation tax cuts.Details of cuts to other taxes such as stamp duty may also be announced as the government tries to limit the impact of soaring energy bills on households.Experts expect it to be the biggest tax-cutting event for 34 years.Labour said funding these tax cuts by borrowing would leave people paying more for longer.However, the government hopes the tax cuts will boost the economy, increase its revenues and prevent a massive increase in the national debt.What could be in the mini-budget?The government has confirmed it will let people keep more of their earnings by cutting National Insurance (NI). Other measures could include:scrapping a planned increase in the amount of tax companies pay on their profits possible cuts to other taxes, including stamp duty which is paid on house purchasesending the cap on bankers’ bonusestightening the rules around universal creditplans to boost economic growth, such as creating low-tax zones around the UKThe announcements will be made by new Chancellor Kwasi Kwarteng, who is in charge of the public finances.The tax-cutting plans under consideration could cost at least £30bn. Will there be a stamp duty cut?There is speculation that the government may cut stamp duty, a tax paid when people buy a property in England and Northern Ireland. No tax is paid on transactions up to £125,000, and from there it rises in bands to a maximum of 12% for the portion over £1.5m. It raises around £12bn for the Treasury.The government is thought to be considering a cut, to help first-time buyers and house moves, which would boost economic growth, according to the Times newspaper.How will National Insurance change?The government has confirmed it will reverse a recent rise in National Insurance (NI) from 6 November. NI is a tax workers pay on their earnings.Since 6 April, workers and employers have paid an extra 1.25p in the pound, to help fund the NHS and social care.NI was set to return to its old rate from April 2023 – to be replaced by a new Health and Social Care Levy at a rate of 1.25%. The levy will now not be introduced.The NHS will still get the funding it was promised, but government is now expected to borrow the money rather than raise it from tax.High earners will benefit most, as they pay the most NI. An NI cut won’t help pensioners or those on very low income or benefits because they don’t pay the tax.Which other announcements are expected?Corporation tax This tax is based on the annual profits that a company makes. It was due to increase from 19% to 25% in April 2023, under a plan announced by the previous PM, Boris Johnson. However, Ms Truss is set to cancel the rise.Green leviesThese charges fund schemes like insulation and renewable energy.The prime minister has promised to temporarily scrap the levies, saving households about £150 each. Income taxA possible cut to the main tax on people’s earnings could also be on the cards. Right now, people in England, Wales and Northern Ireland pay 20% on any annual earning between £12,571 to £50,270. (Rates in Scotland are different). Universal creditMr Kwarteng is expected to announce a welfare shake-up to “get Britain working again”.This is set to include changes to the rules for claiming universal credit, a benefit payment paid to working-age people.How does the government plan to boost growth?The government believes its planned tax cuts will help the economy grow more quickly. It may announce the creation of “special investment zones”. Selected locations around the UK would be allowed to relax planning rules and reduce business taxes to encourage investment. The mini-budget could also see an end to the cap on bankers’ bonuses. This was introduced across the EU in 2014 (when the UK was still a member) following the global financial crisis. Under the current rules, a banker’s bonus cannot be higher than their annual salary – unless shareholders agree.When asked if she would be happy to see bankers getting bigger bonuses, Ms Truss said she wanted to see a growing economy. Can the UK afford to tax less and borrow more?Critics argue immediate tax cuts will require the government to borrow more for years to come.The money, plus interest, will eventually need to be paid back by taxpayers.However, Ms Truss argues faster growth will bring in more money in tax, which will cover the cost of the amount borrowed.Why is it being called a mini-budget?Major decisions about tax and spending are normally made twice a year – in an autumn Budget Statement and a Spring Statement.Today’s announcements are on that kind of scale, covering changes to policies worth billions of pounds, but the new prime minister and chancellor don’t want to wait for a full Budget to implement their new economic strategy.The government has described it as a “fiscal event”, and the media has dubbed it a “mini-budget”.The major difference is that it won’t be accompanied by an official analysis of its impact on the economy. That is usually provided by the Office for Budget Responsibility (OBR) – the body which gives independent a …

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