Image source, Getty Images Tax cuts and measures to stimulate the economy are due to be unveiled in a mini-budget on Friday. It comes as the UK faces a cost of living crisis and the prospect of a recession.
What could be in the mini budget?
allowing people to keep more of their earnings by cutting National Insurance (NI) scrapping a planned increase in taxes paid by companies on their profits possible cuts to other taxes, including stamp duty paid on house purchases; ending the cap on bankers’ bonuses plans to boost economic growth, such as creating low tax zones across the UK
The announcements will be made by the new chancellor Kwasi Kwarteng, who is in charge of public finance. The total cost of the tax cut will be at least £30bn.
What changes are expected at National Insurance?
Ms Truss has pledged to reverse a recent rise in National Insurance (NI) – a tax paid by workers on their earnings. Since April 6, workers and employers have been paying an extra 1.25p in the pound to help fund the NHS and social care. NI was due to revert to its old rate from April 2023 – to be replaced by a new health and social care levy at 1.25%. However, the government could now decide to scrap the levy before it is introduced. If this happens, people on higher incomes will benefit more as they pay the most NI. An NI cut will not help pensioners or those on a low income or benefits because they do not pay the tax.
What other taxes could be reduced?
This tax is based on the annual profits made by a company. However, Mrs Truss is set to cancel the promotion. These fees fund programs such as insulation and renewable energy. The Prime Minister has promised to temporarily scrap the levy, saving households around £150 each. A possible cut in the main tax on citizens’ incomes could also be on the cards. Currently, people pay 20% on any annual earnings between £12,571 and £50,270.
How about stimulating growth?
The mini-budget could also put an end to the cap on bankers’ bonuses. It 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 be higher than his annual salary – unless shareholders agree. When asked if she would be happy to see bankers get bigger bonuses, Ms Truss said she wanted to see a growing economy. The government can also announce the creation of “special investment zones”. Some localities could 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’s conservative rival Rishi Sunak, argue that the immediate tax cuts will lead to higher borrowing. The money, plus interest, will eventually need to be paid back by taxpayers. But Ms Truss argues that the tax cuts will help the economy grow – bringing in more money to cover the cost of the amount borrowed.
Why is it called a mini-budget?
Major decisions about taxes and spending are usually made twice a year – in an autumn budget statement and a spring statement. The Office for Budget Responsibility (OBR) – which provides independent advice to the government – usually publishes its analysis of these statements. It determines the cost of new policies, how much tax will be raised and what it means for the economy. However, the government is refusing to publish the OBR’s assessment alongside the mini-budget. The Treasury said they “remain[s] pledged to maintain the two usual provisions in this year’s fiscal year as required.” 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]. You can also send your questions in the following ways: If you’re reading this page and can’t see the form, you’ll need to visit the mobile version of the BBC website to submit your question or comment, or you can email us at [email protected] Please include your name, age and location in any submission.
