Rishi Sunak is preparing to cut income tax by 2p in the pound or to slash VAT rates before the next election, The Times has learnt.
The chancellor has told officials to draw up detailed plans to reduce the tax burden, with a third option to cut inheritance tax also under consideration.
Sunak’s preference is said to be an income tax cut over the next three years as part of a “retail” offer before 2024, when the next general election is expected.
The Conservatives are also considering scrapping the 45p higher rate of income tax in their election manifesto. The VAT cut would be to the headline rate of 20 per cent, along with more targeted reductions to the regime. Under one plan being considered, households using green energy could pay lower rates.
The Treasury is working on plans to increase the threshold for inheritance tax, which is £325,000 unless it involves property left to children, when it is higher. The figure has been frozen since 2009, with 22,800 estates paying 40 per cent on anything above that.
Sunak is determined to shed his reputation as a “high-tax, high-spend” chancellor after the pandemic. Boris Johnson has also made clear he wants to be a tax-cutting prime minister.
The tax burden is forecast to rise to the highest level since the Labour government in the early 1950s after increases in corporation tax and national insurance. The chancellor set aside £14.7 billion to fund tax cuts if the pandemic is brought under control. It is far more than the reserves gathered by his predecessors.
Sunak told Treasury officials to review the tax burden after stating in his budget that it was his “mission” to cut taxes. Ten options were drawn up and more detailed work is being carried out on three of them — income tax, VAT and inheritance tax.
The chancellor has made clear to colleagues that there will have to be strict limits on public spending if cuts are to go ahead. This week he told the cabinet the NHS must show “tangible” signs of improvement after record levels of funding. A Treasury source said: “The best way to help people is to let them keep more of their hard-earned money and ensure that work pays. But things are tight and in order to deliver on our promise to cut taxes, we need to be disciplined on spending.”
The source said that the plans could be disrupted by a combination of coronavirus and other “economic headwinds”, including inflation. However, both Sunak and Johnson want to push ahead with the tax cuts if possible.
The Times understands that income tax cuts are a clear favourite. A 1p cut in the basic rate of tax would cost about £6 billion a year and affect 31 million people. Under one proposal, the chancellor could cut the basic rate of income tax by 1p in both 2023 and 2024 in the run-up to an election in the spring or summer of that year. The basic rate would fall from 20p to 18p in the pound.
Of the 31 million taxpayers, 26 million pay only the basic rate levied at between £12,500 and £50,000. The tax cut would be worth up to £750 a year, with those in the higher bands benefiting most.
One cabinet minister said the Tories needed a “retail policy” on tax. “There’s no point in waiting until 2024 — it will be too late,” he said. “The cost of living crisis is starting to bite, inflation is looming. We need to do something sooner, to demonstrate our low-tax credentials.”
Paul Johnson, head of the Institute for Fiscal Studies, said that cutting income tax after increasing national insurance to fund health and social care would be “indefensible”, adding: “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.”
Sunak has been promising to be low tax forever (in his short time at the top). Half the time he claims he’s held back by Johnson, the other half Johnson says he’s held back by Sunak. It’s all a performance piece.
> The Conservatives are also considering scrapping the 45p higher rate of income tax in their election manifesto.
…
> The chancellor has made clear to colleagues that there will have to be strict limits on public spending if cuts are to go ahead.
Classic tory filth.
Austerity, Brexit and cutting things to the bone so that councils go bankrupt. . . . . reduce taxes and slash even more spending. Furlough going to need paying back as well.
But as a country we keep voting for them, so all I can do is laugh as it all burns.
Trust The Times to frame this as Little Rishi “slashing taxes” when working class people will be paying more.
This is just a tax cut for wealthy people. Anyone who earns less than £50k will be worse off because of Tory tax increases.
So he raises taxes to the highest level since the 1950s but gets the media to make sure his credentials as a tax cutting Tory don’t get tarnished by emphasising how it’s all going to change in the future? Remind me – how is Johnson’s polling going. Strikes me that Johnson is tolerated even embraced as a vote winner but not trusted at all by the various Conservative factions and will be out the moment he is a liability, while Sunak is positioned ready to be the heir apparent. (I like the way that it’s implied that the NHS has been awash with money as if nothing has been going on or it might be needed for a bit of a backlog.)
BOllocks again! This tax cut will be much more for the rich than the middle class. A decoy to hide other problems and keep voters on board. Shameful
I cannot believe he is calling reducing the top tax band a tax cut for working people. Who the fuck does he think he’s fooling.
If the papers were even remotely doing their job, they wouldn’t report what this government plans to do, because quite often they don’t do what they plan and that rarely gets the same exposure.
Or when they do plan to do it, but the reporting of the plan doesn’t poll well – they scrap it.
Government by client media and polling – recipe for the utter disaster we are in.
>PolicyEngine shows that the [combined Income Tax reforms](http://policyengine.org/uk/population-impact?add_rate=40&basic_rate=18) — lowering the basic rate to 18% and scrapping the additional rate — would cost £10bn per year, reduce poverty by 0.4%, benefit 71% of the public, and disproportionately increase the income of higher-income households.
Gee if only there was a way to lower government spending such as making older people use their several hundred thousand pound assets to cover their care…
Given that we now have the highest tax burden ever, looking to cut that back a bit once we’ve recovered from Covid makes sense. In particularly taking VAT back to the 17.5% rate that it was back in 2011 would be popular, progressive and have a significant impact.
Cutting income tax having just raised NI doesn’t, though. That would just be a pure diversion of tax burden from working people (who pay NI on the bulk of their income) to those with unearned income (who don’t).
12 comments
Rishi Sunak is preparing to cut income tax by 2p in the pound or to slash VAT rates before the next election, The Times has learnt.
The chancellor has told officials to draw up detailed plans to reduce the tax burden, with a third option to cut inheritance tax also under consideration.
Sunak’s preference is said to be an income tax cut over the next three years as part of a “retail” offer before 2024, when the next general election is expected.
The Conservatives are also considering scrapping the 45p higher rate of income tax in their election manifesto. The VAT cut would be to the headline rate of 20 per cent, along with more targeted reductions to the regime. Under one plan being considered, households using green energy could pay lower rates.
The Treasury is working on plans to increase the threshold for inheritance tax, which is £325,000 unless it involves property left to children, when it is higher. The figure has been frozen since 2009, with 22,800 estates paying 40 per cent on anything above that.
Sunak is determined to shed his reputation as a “high-tax, high-spend” chancellor after the pandemic. Boris Johnson has also made clear he wants to be a tax-cutting prime minister.
The tax burden is forecast to rise to the highest level since the Labour government in the early 1950s after increases in corporation tax and national insurance. The chancellor set aside £14.7 billion to fund tax cuts if the pandemic is brought under control. It is far more than the reserves gathered by his predecessors.
Sunak told Treasury officials to review the tax burden after stating in his budget that it was his “mission” to cut taxes. Ten options were drawn up and more detailed work is being carried out on three of them — income tax, VAT and inheritance tax.
The chancellor has made clear to colleagues that there will have to be strict limits on public spending if cuts are to go ahead. This week he told the cabinet the NHS must show “tangible” signs of improvement after record levels of funding. A Treasury source said: “The best way to help people is to let them keep more of their hard-earned money and ensure that work pays. But things are tight and in order to deliver on our promise to cut taxes, we need to be disciplined on spending.”
The source said that the plans could be disrupted by a combination of coronavirus and other “economic headwinds”, including inflation. However, both Sunak and Johnson want to push ahead with the tax cuts if possible.
The Times understands that income tax cuts are a clear favourite. A 1p cut in the basic rate of tax would cost about £6 billion a year and affect 31 million people. Under one proposal, the chancellor could cut the basic rate of income tax by 1p in both 2023 and 2024 in the run-up to an election in the spring or summer of that year. The basic rate would fall from 20p to 18p in the pound.
Of the 31 million taxpayers, 26 million pay only the basic rate levied at between £12,500 and £50,000. The tax cut would be worth up to £750 a year, with those in the higher bands benefiting most.
One cabinet minister said the Tories needed a “retail policy” on tax. “There’s no point in waiting until 2024 — it will be too late,” he said. “The cost of living crisis is starting to bite, inflation is looming. We need to do something sooner, to demonstrate our low-tax credentials.”
Paul Johnson, head of the Institute for Fiscal Studies, said that cutting income tax after increasing national insurance to fund health and social care would be “indefensible”, adding: “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.”
Sunak has been promising to be low tax forever (in his short time at the top). Half the time he claims he’s held back by Johnson, the other half Johnson says he’s held back by Sunak. It’s all a performance piece.
> The Conservatives are also considering scrapping the 45p higher rate of income tax in their election manifesto.
…
> The chancellor has made clear to colleagues that there will have to be strict limits on public spending if cuts are to go ahead.
Classic tory filth.
Austerity, Brexit and cutting things to the bone so that councils go bankrupt. . . . . reduce taxes and slash even more spending. Furlough going to need paying back as well.
But as a country we keep voting for them, so all I can do is laugh as it all burns.
Trust The Times to frame this as Little Rishi “slashing taxes” when working class people will be paying more.
This is just a tax cut for wealthy people. Anyone who earns less than £50k will be worse off because of Tory tax increases.
So he raises taxes to the highest level since the 1950s but gets the media to make sure his credentials as a tax cutting Tory don’t get tarnished by emphasising how it’s all going to change in the future? Remind me – how is Johnson’s polling going. Strikes me that Johnson is tolerated even embraced as a vote winner but not trusted at all by the various Conservative factions and will be out the moment he is a liability, while Sunak is positioned ready to be the heir apparent. (I like the way that it’s implied that the NHS has been awash with money as if nothing has been going on or it might be needed for a bit of a backlog.)
BOllocks again! This tax cut will be much more for the rich than the middle class. A decoy to hide other problems and keep voters on board. Shameful
I cannot believe he is calling reducing the top tax band a tax cut for working people. Who the fuck does he think he’s fooling.
If the papers were even remotely doing their job, they wouldn’t report what this government plans to do, because quite often they don’t do what they plan and that rarely gets the same exposure.
Or when they do plan to do it, but the reporting of the plan doesn’t poll well – they scrap it.
Government by client media and polling – recipe for the utter disaster we are in.
My nonprofit, PolicyEngine, analysed these policies in [this report](https://blog.policyengine.org/income-tax-cuts-rishi-sunak-is-reportedly-considering-9d75eb529262). Summary:
>PolicyEngine shows that the [combined Income Tax reforms](http://policyengine.org/uk/population-impact?add_rate=40&basic_rate=18) — lowering the basic rate to 18% and scrapping the additional rate — would cost £10bn per year, reduce poverty by 0.4%, benefit 71% of the public, and disproportionately increase the income of higher-income households.
Gee if only there was a way to lower government spending such as making older people use their several hundred thousand pound assets to cover their care…
https://12ft.io/proxy?q=https%3A%2F%2Fwww.thetimes.co.uk%2Farticle%2Frishi-sunaks-plan-to-slash-taxes-c30wd5kzx
Given that we now have the highest tax burden ever, looking to cut that back a bit once we’ve recovered from Covid makes sense. In particularly taking VAT back to the 17.5% rate that it was back in 2011 would be popular, progressive and have a significant impact.
Cutting income tax having just raised NI doesn’t, though. That would just be a pure diversion of tax burden from working people (who pay NI on the bulk of their income) to those with unearned income (who don’t).