MILLIONS of households will save hundreds every year after the government confirmed a 1p cut to the basic rate of income tax.
The income tax cut will save 31million people £170 on average next year, according to government estimates.
Kwasi Kwarteng said: "We that we will cut the basic rate of income tax to 19p in April 2023 – one year early.
The tax cut will affect over 31million workers that pay the basic rate of income tax.
It means that anyone earning more than £150,000 will be able to keep more of their earnings, as their tax will go down to 40 per cent for anything above £50,000.
It comes as the Chancellor announced:
- Beer price rise cancelled
- National Insurance rise scrapped saving hundreds a year
- Stamp duty cut for home movers and first-time buyers
- Boost for self employed as complex tax rules axed
- Low-tax investment zones for business
- Corporation tax hike scrapped
- Bankers bonus ditched
Data provided by Blick Rothenberg suggests that the 1p cut to the basic rate of income tax will save those earning £15,000 a year £24.30 a year.
Those earning £25,000 a year will save £124.30 and workers with incomes of £35,000 a year will save £224.30.
Those earning £50,000 a year will save £374.
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The basic rate of income tax is paid by all workers earning between £12,571 and £50,270 a year.
Workers in England, Northern Ireland and Wales were originally set to see the basic rate of income tax fall by one percentage point from 20% to 19% from April 2024.
However, the new Chancellor has brought the policy forward.
Workers only start paying income tax once they start earning over the personal allowance - which currently stands at £12,570.
Any income earned up to £12,570 is tax-free.
However, this amount may be bigger if you claim certain allowances including, blind person’s allowance, marriage allowance and child tax credit.
Right now all earnings between £12,570 and £50,270, are liable to pay the basic income tax rate of 20%.
Wages of £50,271 and above are taxed at the higher rate of 40%.
And the additional rate of income tax, which applies to earnings above £150,000, is 45%.
The thresholds for income tax generally rise each year so that people can earn more without paying more tax.
However, the previous government froze income tax thresholds until 2026 and it is unclear if this policy will remain in place under the fresh Conservative government.