MILLIONS of households will miss out on savings from a 1p cut to the basic rate of income tax next year.
Around 31million people were set to save £170 on average, and up to £377 for the highest earners.
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The previous Chancellor, Kwasi Kwarteng announced in last month’s mini-Budget that he would cut the basic rate of income tax to 19p in April 2023.
But Jeremy Hunt tore Liz Truss’ mini-Budget to shreds today in a bombshell statement.
And Jeremy Hunt has now confirmed that the cut to income tax won’t take place and the basic rate will remain at 20% indefinitely.
Before Kwasi Kwarteng’s mini-Budget, workers in England, Northern Ireland and Wales were originally set to see the basic rate of income tax fall by one percentage point from 20% to 19% from April 2024.
But now Jeremy Hunt has ruled out any cut to income tax for the foreseeable.
It comes as the Chancellor also:
But the cancellation of the cut to income tax means that the average taxpayer will now miss out on £170 in savings next year.
Data provided by Hargreaves Lansdown suggests that the 1p cut to the basic rate of income tax would have saved those earning £15,000 a year £24.30 a year.
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Those earning £25,000 a year would have saved £124.30 and workers with incomes of £35,000 a year would save £224.30.
Those earning £50,000 a year would have saved £374.
Workers only start paying income tax once they start earning over the personal allowance – which currently stands at £12,570.
Any income earned up to £12,570 is tax-free.
However, this amount may be bigger if you claim certain allowances including, blind person’s allowance, marriage allowance and child tax credit.
Right now all earnings between £12,570 and £50,270, are liable to pay the basic income tax rate of 20%.
“The move will cost taxpayers up to £377 a year in additional tax compared to Truss’ previous plans. It means that when April arrives people will no longer get that extra boost to their pay packets.
“The move will save the Government £5.3bn for next year, adding to their coffers and helping to calm the markets. But that clearly has a cost to the public – it means someone earning £25,000 will pay an extra £124 a year while someone on £50,000 will pay £374 more in tax a year.”
Wages of £50,271 and above are taxed at the higher rate of 40%.
And the additional rate of income tax, which applies to earnings above £150,000, is 45%.
Data provided by Blick Rothenberg suggests that the 1p cut to the basic rate of income tax will save those earning £15,000 a year £24.30 a year.
Laura Suter, head of personal finance at AJ Bell said: “The reversal of the basic-rate tax break was signalled ahead of Jeremy Hunt’s statement, but it has now been cut indefinitely, rather than just delayed until 2024.
