Peter Komolafe suggests buying National Insurance credits
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Slashing the tax burden is reported to be high on the agenda for new Chancellor Kwasi Kwarteng this Friday but some people will be left better off than others. Britain’s poorest households will gain just 63p a month from reversing the national insurance hike, while people earning more than £100,000 will benefit the most, a new study claims.
Britons are set to save between 63p and £150 a month if a proposed National Insurance cut gets the green light and is announced in the new Chancellor’s mini budget this Friday.
Some three million people who earn an average of £12,000 will save £7.66 – which works out at a mere 63p a month.
Those earning £31,400 will save around £20 a month – while Britons on an income of £55,000 will save almost three times as much at around £58 a month.
The richest tenth of taxpayers, earning an average of £108,000, will save £1,800 on their annual tax bill, equivalent to £150 a month, acccording to the Insitute of Fiscal Studies (IFS).
All the energy suppliers slashing fixed energy bills from October
Express.co.uk reported on Sunday that Mr Kwarteng looks set to reverse April’s National Insurance increase, which lifted the levy by 1.25 percent to 13.25 percent, slashing tax bills for 32 million workers.
Tony Wilson, director of the Institute for Employment Studies, told The Times the plans would benefit higher earners much more than those on a lower income.
He said: “The worry among Bank of England and Treasury officials will be that the move is more inflationary than a more targeted subsidy or tax cut.”
The 1.25 percent rise in national insurance was implemented in April to help fund health and social care levy, but it is now reported that it will be scrapped under new Prime Minister Liz Truss’ watch.
There are rumours that Mr Kwarteng will also cut VAT in a radical move that would instantly slash inflation.
Businesses would benefit from a boom in sales as their goods would be cheaper to buy while their profit margins would remain intact.
In addition, the Government has already committed to cut a penny off income tax in 2024.
That would cut basic rate income tax from 20p to 19p in the pound, in a boost for more than 30 million workers.
Rumours are also circulating that inheritance tax (IHT) could be axed – a move that will prove popular if it is instigated.
IHT is one of the UK’s most hated taxes as many people believe it’s a way to tax them twice – once on earnings and another on death.
Charged at 40 percent on family assets above £325,000, it brings in record amounts for HM Revenue & Customs (HMRC) every year.
HMRC collected £6.1 billion from IHT last year, a figure that is increasing every year as property prices continue to rise but the threshold remains the same.
Meanwhile, the threshold at which people need to start paying National Insurance changed in July – leaving millions of Britons better off.
Changes to the National Insurance threshold meant that workers could earn £12,570 instead of £9,880 before they started to pay National Insurance contributions (NICs).
It resulted in two million more people becoming exempt from paying National Insurance together.
HM Treasury has an online tool where people can work out exactly how much more or less NI they will have to pay which can be found at Gov.uk.
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