RISHI Sunak is drawing up plans to cut income tax by 2p in the pound before the next general election.
The chancellor is considering a raft of tax-cutting measures, but the income tax cut is currently the preferred option, the Times reports.
It is thought that the cut could be achieved in stages, with basic rate tax thresholds dropping from 20% now to 19% in 2023 and 18% by 2024.
The average annual UK salary is thought to be approximately £30,368, according to the latest ONS figures.
If basic rate tax charges drop to 18%, someone earning the average salary would save £356 a year in income tax.
The maximum you could save is £760 a year, which would apply to anyone earning £50,270 or more.
People who earn less than the average salary would save less, and anyone earning less than £12,570 a year wouldn’t save anything as they don’t currently pay income tax.
Other possible initiatives include scrapping the 45% additional rate of tax for higher earners, reducing VAT on green energy and even raising inheritance thresholds.
Sunak said in his winter budget that it was his “mission” to cut taxes, but a combination of increases in corporation tax and national insurance means that the tax burden on UK workers as at its highest level since 1950.
However, both Mr Sunak and Prime Minister Boris Johnson are thought to be prioritising tax cuts in the hopes of securing conservative party re-election.
The plan is to make any changes before 2024 when the next general election is expected to be held.
The Times says that in total ten options were mooted and more detailed analysis is being carried out on three – income tax, VAT and inheritance tax.
Each 1% cut in income tax would cost the Treasury around £6bn, and the chancellor is said to have set aside £14.7 billion to fund tax cuts altogether.
But any moves to lower taxes are likely to be accompanied by tighter controls on public spending.
“Things are tight and in order to deliver on our promise to cut taxes, we need to be disciplined on spending,” a Treasury source told the Times.
Some ministers are pushing for changes to come sooner saying that 2024 will be too late to tackle looming inflation. But not everybody is happy about the proposed cuts.
The Institute for Fiscal Studies branded the plans “indefensible” saying that they unfairly discriminate and are too generous for wealthier individuals at the expense of poorer Brits.
Paul Johnson, head of the IFS told the Times: “To introduce the health and social care levy, which essentially only affects workers, then to cut income tax, which also benefits people who receive their income from rent, occupational pensions and other holdings, discriminates in favour of the wealthy.”
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