Chancellor Kwasi Kwarteng unveiled his mini-budget this morning, in what is believed to be the Government’s steepest tax cuts in 34 years.

It comes amid a cost-of-living crisis that has left millions of households struggling to pay their bills as fuel, food and energy prices soar.

The Government hopes that by cutting tax it will put more money in people’s pockets and help boost the economy.

How will it affect my salary?

The national insurance hike introduced by Boris Johnson’s government will be reversed from 6 November, the Government has announced.

It had been brought in by Mr Kwarteng’s predecessor at No 11, Rishi Sunak, but during the Conservative Party leadership race Liz Truss had vowed to change it.

The measure was brought in to fund the NHS and social care and was due to be replaced by a 1.25 per cent Health and Social Care Levy in April, which has also been axed.

Instead, the funding for the health service and social care is expected to be borrowed by the Government.

The Treasury has said that cutting the National Insurance rise will save an average of £330 per year for nearly 28 million people, but analysis has suggested that those earning more than £100,000 would benefit the most.

The changes mean those earning £20,000 will save around £93 a year, people on £30,000 will save around £218 and those with a salary of £50,000 will keep an additional £468.

Meanwhile, among higher earners, those with a salary of £80,000 will save around £843 while people earning £100,000 a year will see their annual pay packet boosted by around £1,093.

What about income tax?

As part of a £30bn tax cut package unveiled by Mr Kwarteng, the basic rate of income tax has also been cut to 19 per cent, in a further boost to people’s wages.

Prior to today’s measures being announced, the basic rate of income tax on earnings between £12,571 and £50,270 was 20 per cent.

Mr Kwarteng told MPs the cut would come into effect from April, 2023.

Data from tax advisory firm Blick Rothenberg suggests that a 1p cut to the rate to 19p in the pound would save £124.30 a year for those on a salary of £25,000 and £224.30 a year for workers earning £35,000.

It would work out to a £674 and £874 saving for workers with an income of £80,000 and £100,000, respectively.

The additional 45 per cent top rate of income tax on wages over £150,000 , which is paid by around 629,000 high-earners, will be abolished from 1 April and cut to 40 per cent, Mr Kwarteng said.

FILE PHOTO: New British Chancellor of the Exchequer Kwasi Kwarteng walks outside Number 10 Downing Street, in London, Britain September 6, 2022. REUTERS/Toby Melville/File Photo
Kwasi Kwarteng will unveil his mini-budget today (Photo: Toby Melville/Reuters)

What about if I am buying a home?

Stamp duty, the tax that is paid when people buy a home, has also been cut as part of the mini-budget.

Prior to today, there was no stamp duty paid on homes that cost up to £125,000, with the amount paid rising in bands to a maximum of 12 per cent.

The amount of stamp duty owed is two per cent for properties worth between £125,001 and £250,000 rising to 12 per cent on any home above £1.5 million.

Mr Kwarteng has doubled the threshold of a property’s value before which stamp duty is owed to £250,000 for buyers in England and Northern Ireland, with the changes taking effect immediately.

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The Chancellor has also increased the property value threshold for first-time buyers who are exempt from paying stamp duty from £300,000 to £425,000, which he described as “permanent cut”.

Following today’s announcement, Mr Kwarteng said 200,000 more people would be exempt from paying stamp duty each year.

A homebuyer looking to purchase a £270,000 property would now pay £1,000 in stamp duty, saving £2,500.

Somebody buying a home for £500,000 will now pay £12,500, also saving of £2,500.

For somebody buying a home worth £240,000, the cost of buying their property will fall by £2,300.

What if I’m on Universal credit?

Thousands of part-time workers claiming Universal Credit are set to have their benefits reduced if they don’t take “active steps” to find work.

Mr Kwarteng told MPs the move was needed to “encourage people to join the labour market”

Around 120,000 Universal Credit claimants working up to 15 hours a week at the National Living Wage are to be affected by the reform, which is expected to come in from January 2023, “or face having their benefits reduced”, Mr Kwarteng said in his announcement today.

At the moment, claimants working up to 12 hours a week at the National Living Wage could have their benefits cut if they do not take steps to increase their earnings and meet regularly with a work coach.

The National Living Wage is current £9.50 for over 23s, £9.18 for 21 to 22-year-olds £6.83 for 18 to 20-year-olds and £4.81 for apprentices and those under the age of 18.

Mr Kwarteng’s reform will extend this to include those working up to 15 hours.

How will it affect small businesses?

As part of the reversal of the National Insurance increase, around 920,000 firms will get a tax reduction of nearly £10,000 from next year, according to the Treasury.

Under the plan, firms will no longer pay a higher level of employer National Insurance, the Government said.

Mr Kwarteng said: “If a business hires a new employee in the tax site then on the first £60,000 they earn the employer will pay no national insurance whatsover.”

The planned rise in corporation tax from 19 per cent to 25 per cent from April next year is also being binned.

It will save businesses an estimated £17bn a year, according to analysis by The Times.

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