‘Inheritance tax abolished, VAT reduced and 1p less on income tax’ – Kwarteng lists tax results | Personal finance | Finance

The new chancellor has drawn up a mini-budget to cut taxes as he fights to revive Britain’s economy. Instead of providing more cost-of-living payments, it can put more money in people’s pockets by reducing the tax burden.

As we reported on Sunday, Kwarteng looks set to reverse April’s National Insurance increase, which raised the levy from 1.25% to a punitive 13.25%. It would be a hugely popular move as it would cut the tax bills of 32 million workers.

The Chancellor may have other tricks up his sleeve when he rises to deliver his speech in Parliament on Thursday.

There are growing rumors that Kwarteng will cut VAT in a sweeping move that would instantly reduce inflation.

Laura Suter, personal finance manager at AJ Bell, said he could potentially reduce it from 20% today to 15% or even 10%.

By reducing the price of everyday goods and services, it would put money directly into people’s pockets, with a positive ripple effect for the whole economy.

Companies would see their sales explode because their goods would be cheaper to buy while their profit margins would remain intact. “Kwarteng could sell this move as an additional boon for cash-strapped businesses,” Suter said.

The government has already pledged to cut income tax by one penny in 2024, a measure announced when Rishi Sunak was still chancellor.

It would cut income tax at the basic rate from 20p to 19p in the pound, in a boost for more than 30 million workers.

Kwarteng could further boost taxpayers’ morale by offering the 1p income tax cut, said Myron Jobson, senior personal finance analyst at Interactive Investor.

“Alternatively, it could increase the personal abatement, the rate above which people start paying income tax. Either of these measures would put money in people’s pockets.

READ MORE: National Insurance to be slashed by $30million tax boost on Thursday

The Office for Tax Simplification has called for the IHT to be overhauled, as the system is incredibly complex and mistakes are easy to make.

During the Conservative Party leadership campaign, Liz Truss pledged to oversee a review of the IHT if she became Prime Minister.

Nothing is on the table as Truss seeks to make a splash with voters.

Abolition of the IHT altogether would be controversial, with the government facing a huge deficit, but it would be popular.

Any tax cuts made by Kwarteng would come on top of the energy price guarantee of £2,500 a year announced by Truss earlier this month.

It could cost £130 billion.

While the tax cut will be popular, Kwarteng also has to deal with “the elephant in the room”, Jobson said.

“Public debt is at its highest since the 1960s following gigantic multi-billion dollar Covid spending and cost-of-living support measures, while rising interest rates drive up the costs of living. ‘loan.’

Even if Kwarteng doesn’t introduce all of those measures, Thursday should bring better news than Sunak’s budgets, which have repeatedly raised taxes.

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