Truss's Mini-Budget to Unveil Tax Cuts Worth Thousands of Pounds to Households

Conservative Prime Minister Liz Truss has delivered on her promise of an emergency "mini-Budget" scheduled for September 23rd, which is expected to unveil a package of tax cuts worth thousands of pounds to households struggling with the cost-of-living crisis. The new Chancellor, Kwasi Kwarteng, is expected to reverse the 1.25 percentage point increase to National Insurance, which was introduced in April and resulted in a 10pc tax jump for many workers. Tax cuts will free up more money to help people make ends meet in the short term, but experts warn that cutting VAT or fuelling more spending could push prices up for longer and dent our longer-term financial resilience.

Key Takeaways:

• The mini-Budget is expected to reverse the 1.25 percentage point increase to National Insurance, which was introduced in April and equated to a 10pc tax jump for many workers.
• The tax increase went ahead despite widespread calls for it to be delayed or cancelled as households struggled with soaring inflation, and reversing the rise will curry favour with the electorate.
• Tax cuts will benefit households but wealthier households will save the most in pounds and pence due to their bigger spending budgets.
• The Prime Minister has committed to a review of inheritance tax, which raked in a record £6.1bn for the Government in the most recent tax year, with millions of families being caught by the hated tax due to its threshold freeze and higher property prices.
• The marriage allowance, which is currently capped at a transfer of £1,260 for basic-rate taxpayers, may be extended to allow couples to transfer their entire personal tax allowance, potentially saving couples as much as £2,500 a year.
• Ms Truss is reportedly considering cutting VAT from 20pc to 15pc across the board in a bid to tackle the cost living crisis.

Statistics:

• The 1.25 percentage point increase to National Insurance equated to a 10pc tax jump for many workers.
• Someone earning £50,000 would save £468 a year if the rise was reversed, while someone earning £180,000 would get an annual tax cut of more than £2,000.
• VAT is levied on most products and services, and cutting it to 15pc would result in an immediate drop in spending for all households.
• Income tax thresholds were frozen until 2026 in March of this year, and reversing the freeze could provide the new Chancellor and Prime Minister with a quick win amongst squeezed households.
• The marriage allowance is currently capped at a transfer of £1,260 for basic-rate taxpayers, and extending it to allow couples to transfer their entire personal tax allowance could save couples as much as £2,500 a year.

Sources:

• "Liz Truss set to unveil £5bn tax cut package in mini-Budget as Kwasi Kwarteng prepares to reverse national insurance hike" - The Telegraph
• "Tax cuts will free up more money to help people make ends meet in the short term, but experts warn that cutting VAT or fuelling more spending could push prices up for longer and dent our longer-term financial resilience." - Hargreaves Lansdown analyst Sarah Coles
• "Party members and traditional Conservative voters have a deep disdain for inheritance tax, and Ms Truss may be tempted to abolish it completely. But there would need to be something in its place and there could be revived calls to introduce a wealth tax." - Blick Rothenberg's Nimesh Shah