Kwasi has delivered his first mini-budget today and the headline is this is a tax-cutting budget which overall is good news! It represents the largest tax cuts since 1972!
In this quick update, I will be outlining the good, the bad and the ugly aspects of the budget!
Firstly, the good
·       The basic rate of income tax has fallen from 20% to 19%. This means that your first approx. £37,700 of income will be taxed at a lower rate Great news! 31 million taxpayers will see their after-tax income increase.
·       The increase in national insurance of 1.25% imposed by Rishi Sunak will be reversed also benefiting 31 million taxpayers.
·       Freezing energy bills effectively subsiding energy costs for everybody which will help with the cost-of-living crisis.
Next, the bad
·       The proposed increase in corporation tax from 19% to 25% has been cancelled. While I felt an increase of 6% was excessive, I am sure even small businesses would appreciate that a marginal increase of 2% to 21% would help pay for the cost of furloughing and COVID grants claimed by businesses.
·       Stamp duty abolished on the first £250,000. First time buyers will not pay any stamp duty on properties costing up to £425,000. Tinkering with stamp duty only leads to an increase in property prices.
Finally, the ugly
·       In a bizarre move, Kwasi has abolished the additional rate of tax of 45% for the wealthy earning more than £150,000. This move will only affect the top 1% of earners in the UK. According to the Treasury, 660,000 people will now pay £10,000 less in tax a year.
·       In another unjustified measure, Kwasi abolished the cap on banker bonuses which is currently 200% of your basic salary. This cap meant that a banker earning £200,000 a year could only receive a bonus of £400,000. Now, these bankers can get a bonus of £1 million! Once again, this measure only helps a select few millionaires.
Overall, the government plans on funding the tax cuts by a big increase in borrowing which shows poor fiscal management and has led to sterling falling against the dollar.
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