What the ’emergency budget’ means for YOU: from income tax cuts to reversing National Insurance rises

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What the ’emergency budget’ means for YOU: From cutting the basic rate of income tax to 19p to reversing the rise in National Insurance… how the chancellor’s bailout deal will affect Brits amid cost-of-living crisis

  • The chancellor is using the ’emergency budget’ to cut the basic rate of income tax by 1p
  • Kwasi Kwarteng is also scrapping the 45p tax rate paid by those with more than £150,000
  • The Ministry of Finance estimates that more than 30 million taxpayers will benefit from the changes

More than 30 million taxpayers are set to benefit from income tax cuts next year, Kwasi Kwarteng announced today.

The chancellor this morning used his ’emergency budget’ to cut the basic rate of income tax by 1p from April.

This means that the base interest rate will now decrease from 20 percent to 19 percent a year earlier than planned.

The Treasury has estimated that 31 million taxpayers will benefit from the 1p cut next year, with an average gain of £170.

Mr Kwarteng also dramatically announced he was scrapping the 45p tax rate currently paid by those earning more than £150,000 a year.

The extra rate will be removed from April and means that all annual income above £50,270 will now be taxed at the current higher rate of 40%.

The Ministry of Finance estimated that around 660,000 people will benefit from the abolition of the additional rate next year.

Chancellor Kwasi Kwarteng this morning used his 'emergency budget' to cut the basic rate of income tax by 1p from April

Chancellor Kwasi Kwarteng this morning used his ’emergency budget’ to cut the basic rate of income tax by 1p from April

Mr Kwarteng’s changes to income tax rates next year will see those earning £20,000 a year save £74.30, while those earning £50,000 will save £174.32 and those on £200,000 £2,877.

Liz Truss, who is entitled to a salary of £164,080 as Prime Minister, will save more than £1,000 in income tax.

In addition to the income tax cut, the Chancellor also confirmed today that he is scrapping the increase in National Insurance contributions to further encourage employees.

The 1.25 percentage point increase was introduced in April by former chancellor Rishi Sunak. However, it will now be reversed from November 6.

Mr Kwarteng is also scrapping the planned Health and Social Care Levy – a separate tax due to come into force in April to replace this year’s rise in National Insurance.

The Treasury estimates this will benefit 28 million people in the UK, saving around £135 on average.

The levy is expected to raise around £13 billion a year, although the chancellor today promised to keep NHS and social care funding at the same level as planned.

Mr Kwarteng told the House of Commons that his tax changes were part of a “new approach for a new era” as he and Ms Truss sought to “unleash the enormous potential of this country”.

He claimed the cuts would mean Britain has “one of the most competitive and pro-growth tax systems in the world”.

In the ’emergency budget’, the chancellor also confirmed a ‘guaranteed energy price’ to limit electricity and gas costs for households.

This means typical household energy bills will be frozen at £2,500 for the next two years.

“For a typical household, that’s a saving of at least £1,000 a year at current prices,” Mr Kwarteng told MPs.

‘We are continuing with our existing plans to reduce all households’ bills by £400 this winter.

“So together we’re reducing everyone’s energy bills by an expected £1,400 this year.”

Today’s tax changes will not affect income tax rates in Scotland, as they are set by the Scottish Government.

This will further increase the differences between the amount paid north and south of the border.

First Minister Nicola Sturgeon has signaled her opposition to copying Mr Kwarteng’s tax cuts.

She claimed the chancellor’s “reckless” action would benefit the richest rather than the poor and middle income earners, would “lock down” the pound and increase the cost of borrowing.

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