In an attempt to boost the UK’s economy, Prime Minister Liz Truss backed tax cuts and investment incentives announced by Finance Minister Kwasi Kwarteng when he spoke to the House of Commons last week.
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The government aims to revitalise the faltering economic growth and is targeting a medium-term 2.5% trend rate in economic growth. In his speech, Kwarteng asserted that high taxes deter people from working and investing and impede business development. The total saved by these cuts is estimated to reach £45 billion by 2026-27.
The measures announced include:
- Cancellation of a previously planned corporation tax rise, keeping it at 19% as opposed to the proposed 25% hike
- The recent rise in National Insurance contributions has been reversed
- The basic rate of income tax reduced from 20 pence to 19 pence
- Doing away with the 45% income tax paid on incomes over £150,000, which means the new top rate is 40%
- Considerable cuts to Stamp Duty Land tax
- Establishing “investment zones” around the country where businesses can take advantage of tax cuts, liberalised planning rules, and reduced regulatory obstacles
- A claim-back scheme for tourists on sales tax
- No longer moving forward with a tax increase on alcohol
- Doing away with the previously announced cap on bankers’ bonuses
According to experts, it’s been 50 years since tax cuts of this magnitude have been instituted and the initial response is troubling. Just hours after the announcement, pound sterling fell to a 37-year low against the dollar, with investors selling UK government bonds while the FTSE fell to its lowest level since March.
The announcement and subsequent panic came after the Bank of England declared last week that the UK was already likely in a recession and that when the official third-quarter numbers are announced, it will officially be announced. As a result, they raised interest rates by 50 basis points in an effort to offset sky-high inflation.
To discuss how your finances will be affected by these measures, get in touch with the experts at Dental & Medical Financial Services today.