Plans to tackle the cost-of-living crisis will be set out in a mini-budget on Friday.
New Prime Minister Liz Truss has pledged to cut tax and boost the economy.
What could be in the mini-budget?
The announcements will be made by new Chancellor Kwasi Kwarteng, who is in charge of the public finances.
- letting people keep more of their earnings by cutting National Insurance (NI)
- scrapping a planned increase in the tax companies pay on their profits
- possible cuts to other taxes, including stamp duty which is paid on house purchases
- ending the cap on bankers’ bonuses
- plans to boost economic growth, such as creating low-tax zones around the UK
The total cost of cutting taxes will be at least £30bn.
What changes are expected to National Insurance?
Ms Truss has pledged to undo the recent increase in National Insurance (NI) – a tax workers pay on their earnings.
Since 6 April, workers and employers have paid an extra 1.25p in the pound to help fund the government’s NHS and social care plan.
Under the previous plan, NI was due to return to its old rate from April 2023, when a new Health and Social Care Levy would be introduced, at a rate of 1.25%.
If the cut goes ahead, higher earners pay will benefit more as they pay the most NI.
An NI cut won’t help pensioners or those on low income or benefits because they don’t currently pay the tax.
Which other taxes could be cut?
Corporation tax is is based on the annual profits that a company makes.
However, Ms Truss is set to cancel the rise.
She has also promised to temporarily scrap “green levies”, saving households about £150 each. These charges fund programmes like insulation and renewable energy.
A possible cut in income tax could also be on the cards. Right now, people pay 20% on any annual earning between £12,571 to £50,270.
A change in stamp duty – a tax paid on property purchases – is also thought to be under consideration.
How about boosting growth?
The mini-budget could also see an end to the cap on bankers’ bonuses. The cap was introduced across the EU in 2014 (when the UK was still a member) following the global financial crisis.
When asked if she would be happy to see bankers getting bigger bonuses, Ms Truss said she wanted to see a growing economy.
The government may also announce the creation of “special investment zones”. Certain locations could be allowed to relax planning rules and reduce business taxes to encourage investment.
Will we hear more about energy prices?
The government has already said that a typical household can expect to pay about £2,500 a year in energy bills for two years from October. The energy cap had been due to rise to £3,549 for a typical household.
More details about what the schemes will cost and how they will be funded are due to be unveiled. Experts have previously suggested the support could cost as much as £150bn.
Can the UK afford to tax less and borrow more?
Critics, including Ms Truss’ Conservative leadership rival Rishi Sunak, argue immediate tax cuts will lead to higher borrowing.
Borrowing is when governments raise money by selling bonds – usually to international investors.
The money, plus interest, will eventually need to be paid back by taxpayers.
However, Ms Truss argues tax cuts will help the economy grow – bringing in more revenue which will cover the cost of the amount borrowed.
Why is it being called a mini-budget?
Major decisions about tax and spending are normally made twice a year – in an autumn Budget Statement and a Spring Statement.
The independent Office for Budget Responsibility (OBR) normally published an analysis of the measures contained in each of the statements. This sets out the cost of new policies, how much tax will be raised and what the government’s decisions mean for the economy.
However, the government is refusing to publish the OBR’s independent assessment alongside the mini-budget on Friday.
The Treasury said it “remain[s] committed to maintaining the usual two forecasts in this fiscal year, as is required”.
A full-scale Budget is expected later this year, but no date has been set.
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