Hammond to coincide tax cuts with Brexit

PHILIP HAMMOND is preparing to use his Budget to bring forward income tax cuts for millions to a month after Britain leaves the EU, The Daily Telegraph has learnt.

The move, which would benefit more than 30 million taxpayers, will raise income tax thresholds from April 2019, a year earlier than planned.

The Chancellor is considering the plan for Monday’s Budget after the biggest improvement in forecasts for the public finances in decades. The Office for Budget Responsibility is to give the Chancellor more room for manoeuvre with forecasts showing that borrowing is £13billion lower than thought.

In their manifesto the Tories pledged to increase the personal allowance, the rate at which people start paying income tax, to £12,500 by 2020-21. The threshold for the higher rate of income tax will rise to £50,000.

Bringing the plans forward by a year will leave people hundreds of pounds better off from April next year. It is expected to cost the Treasury up to £5 billion. Tory MPS have been warning that they could rebel and vote against the Budget if there are tax rises for middle-class families or it fails to provide more funding for Universal Credit.

Writing in The Telegraph today Priti Patel, a former Cabinet minister, says the Chancellor must deliver a “truly Conservative Budget” and reduce the tax burden for families. She says that Tory MPS will “struggle” to support any tax rises.

Mr Hammond had been considering controversial measures such as postponing the income tax cuts or slashing pensions tax relief in a bid to fund a £20billion boost for the NHS and meet the cost of social housing improvements. However the improved forecasts mean he will be able to use his Budget to set out the potential “deal dividend” from Brexit negotiations.

There are concerns though that he could raise insurance premium tax to help fund increases in public spending.

One Tory MP, who is part of a group who have said they will rebel if nothing is done to improve Universal Credit, said: “We’ve got to deliver Brexit but we’ve also got to keep governing and delivering for our constituents.”

Senior Tory MPS told The Telegraph that potential rebellions over the Budget are being fuelled in part by Brexit because there is “no goodwill left” for Mr Hammond among Eurosceptics.

The Institute for Fiscal Studies has said that Mr Hammond will have to spend at least an extra £20billion on public services to fulfil the Prime Minister’s pledge to end austerity.

♦ A £1.5 billion package to support Britain’s struggling high streets will be set out in the Budget, it was reported last night. Mr Hammond will announce £900 million in business rates relief for almost 500,000 small retailers.