Plans to tackle the cost of living crisis will be set out in a small budget on Friday.
New Prime Minister Liz Truss has pledged to cut taxes and boost the economy.
What can be included in the mini-budget?
The new Chancellor Kwasi Kwarteng, who is in charge of public finances, will make the calls.
- allowing people to keep more of their earnings by reducing National Insurance (NI).
- rejecting the planned increase in the tax increase that companies pay on their profits
- possible reductions in other taxes, including stamp duty paid on house purchases
- ending the limit on bankers’ allowances
- plans to promote economic growth, such as the creation of low tax zones around the UK
The total cost of the tax cuts will be at least £30 billion.
What changes are expected in the National Insurance?
Ms Truss has pledged to scrap the latest increase in National Insurance (NI) – which tax-payers pay out of their earnings.
Since April 6, workers and employers have paid an extra 1.25p in the pound to help fund the government’s NHS and social care plan.
Under the previous plan, NI was due to revert to its old rate from April 2023, when the new Health and Social Care Levy would be introduced at a rate of 1.25%.
If the cut goes ahead, higher earners will benefit more as they pay the most NI.
The NI cut will not help pensioners or those on low incomes or benefits, who do not currently pay tax.
What other taxes can be reduced?
Corporate tax is based on a company’s annual profits.
However, Mrs Truss will cancel the promotion.
It has also promised to temporarily scrap ‘green rates’, saving households around £150 each. These charges fund programs like insulation and renewable energy.
A possible income tax cut could also be on the cards. Right now, people pay 20% on any annual earnings between £12,571 and £50,270.
A change in stamp duty – the tax paid on real estate purchases – is also being considered.
How about driving growth?
Mini-budgets could also see an end to the bankers’ allowance cap. The cap was introduced across the EU in 2014 (when the UK was still a member) following the global financial crisis.
When asked if he would be happy to see bankers get bigger bonuses, Truss said he wanted to see a growing economy.
The government may also announce the creation of “special investment zones”. Some locations could be allowed to relax planning rules and reduce business taxes to encourage investment.
Will we hear more about energy prices?
The government has already said the average household can expect to pay around £2,500 a year on their energy bill for two years from October. The energy cap was due to rise to £3,549 for a typical household.
More details about what the program will cost and how it will be funded need to be disclosed. Experts have previously suggested the bailout could cost £150 billion.
Can the UK afford to tax less and borrow more?
Critics, including Ms Rishi Sunak’s Conservative leadership rivals, say the immediate tax cuts will lead to more debt.
Borrowing is when governments raise money by selling bonds, usually to international investors.
The money, plus interest, will eventually have to be paid back by taxpayers.
However, Truss says the tax cuts will help grow the economy by bringing in more revenue, which will cover the cost of the borrowed amount.
Why is it called a mini-budget?
Major decisions on taxation and spending are usually made twice a year: in an autumn Budget Statement and in the spring.
The independent Office for Budget Responsibility (OBR) published an analysis of the measures typically included in each statement. In this, the cost of the new policies, how much taxes will increase and what the government’s decisions will mean for the economy is determined.
However, the government is refusing to publish the OBR’s independent assessment of the budget on Friday.
Treasury said “stay[s] In this event, he has committed to maintain the two usual forecasts, as needed”.
A full budget is expected by the end of this year, but no date has been set.