Kwarteng is set to wield axe on UK tax burden

BRITONS could be celebrating a string of tax cuts when Chancellor Kwasi Kwarteng stands up to deliver his “emergency budget” on Thursday.

The Government confirmed last week that it would hold a “fiscal event” to address the cost-of-living crisis, once the mourning period for the sad death of the Queen is over.

With the Commons due to go into recess on September 22, this is new Prime Minister Liz Truss’s only chance to put her stamp on the economy. She is keen to cut the tax burden to encourage investment, boost spending and drive growth.

Truss repeatedly pledged to cut taxes during the Conservative leadership contest, including the controversial 1.25 per cent hike in the National Insurance (NI) rate.

The Health and Social Care Levy is likely to be axed in what would be a popular move, said

Tim Walford-fitzgerald, partner at accountancy firm HW Fisher: “I would expect Kwarteng to allow the levy to expire naturally on April 5, 2023, rather than reverse it in the middle of the year.”

Truss has already committed to reversing the planned corporation tax hike, which would have lifted the charge from 19 per cent to 25 per cent next April. Business owners may get a second helping of assistance if Kwarteng reverses the recent dividend tax increase too, Walford-fitzgerald added: “Although Truss may consider the decision to scrap the corporation tax hike is enough.”

Any tax cuts would come on top of the £2,500-a-year Energy Price Guarantee that Truss announced earlier this month, at a potential cost of £130billion.

The Chancellor may supply more information on how this is going to work in practice, said Laura Suter, head of personal finance at AJ Bell: “The big question is how the Government is going to pay for it and whether taxpayers will foot the bill.”

There have also been rumours that Kwarteng will cut VAT, from 20 per cent to as low as 15 or 10 per cent.

He could even bring forward the 1p income tax cut, originally earmarked for 2024, said Myron Jobson, senior personal finance analyst at Interactive Investor: “Or he could raise the personal allowance, the rate above which people start paying income tax.”

But Kwarteng also has to face up to the “elephant in the room”, Jobson added: “Public debt is at the highest levels since the 1960s following the multibillion-pound spend on Covid and cost-of-living support measures, while rising interest rates are pushing up borrowing costs.”