Rishi Sunak has announced the intention to cut taxes before the next general election in 2024. The Chancellor has told Treasury officials to draw plans for reducing the tax burden, including cuts to income tax, inheritance tax and VAT. Income tax is expected to be cut by 1p in 2023 and a further 1p in 2024, with basic rate tax thresholds dropping from 20% now to 19% in 2023/24 and 18% by 2024/25. The measure could potentially save £754 a year to taxpayers with earnings over £50,270, costing the government around £6bn for each 1% cut.
It was also discussed the possibility of scrapping the 45% additional rate of income tax. It would be raising the inheritance tax (IHT) thresholds and reducing VAT for households and thousands of small businesses using green energy. To finance these planes the government has announced its intention to raise an estimated additional £70bn by 2025-26 through freezing personal tax allowances and the introduction of the Social Care Levy.
Considering the 1.25% Health and Social Care Levy announced by the Prime Minister in September, introduced from April 2022, the overall savings for taxpayers will drastically reduce. A person earning £60,000 will see their net income reduced by £589, making the new announcement only worth £165. A Treasury spokesman said: ‘We keep the tax system under constant review. And as the Chancellor made clear at the Budget, by the end of this parliament we want taxes to be going down, not up. We do not comment on speculation about specific tax changes.’