10:43 am, September 23, 2022
Car dealers that earn more than £150,000 a year will be considerably better off next year after the Chancellor axed the 45 per cent tax rate for high earners.
Chancellor Kwasi Kwarteng abolished the top rate of income tax for the highest earners as he spent tens of billions of pounds in a bid to drive up growth.
He scrapped the 45 per cent higher rate of income tax and brought forward the planned cut to the basic rate to 19p in the pound a year early to April.
From April, the 629,000 earners getting more than £150,000 a year will no longer pay the top income tax rate of 45 per cent and will instead pay the 40 per cent applicable to those on over £50,271.
In a so-called mini-budget axing the cap on bankers’ bonuses and adding restrictions to the welfare system, he argued today (Sep 23) that tax cuts are ‘central to solving the riddle of growth’.
The planned corporation tax rise from 19 per cent to 25 per cent has also been canned.
The 47-year-old also revealed his estimate that the two-year energy bills bailout will cost around £60bn over its first six months from October.
Chancellor Kwasi Kwarteng says next year’s planned increase in corporation tax “will be cancelled”.
Rates will not rise to 25%, and will remain at 19%.
Latest on the mini-budget: https://t.co/7S7XxU4iZQ
📺 Sky 501, Virgin 602, Freeview 233 and YouTube pic.twitter.com/MWNDUsGSDx
— Sky News (@SkyNews) September 23, 2022
The major spending package also included:
- A cut to stamp duty, meaning 200,000 less people will pay the tax on house purchases
- The introduce of VAT-free shopping for overseas visitors
- Legislation to force trade unions to put pay offers to a member vote so strikes can only be called once negotiations have fully broken down
- Confirmation of plans to make around 120,000 more people on Universal Credit take active steps to seek more and better paid work, or face having their benefits reduced.
Experts have called on the government to consider the ‘long term health’ of the automotive industry after the chancellor outlined his plans to deal with the cost of living crisis.
The measures have been met with criticism from some quarters with Jim Holder, editorial director of What Car?, saying they would only help ‘in the short run’.
He said: ‘With the economy now officially in a recession, action is needed.
‘Our latest research of more than 1,200 in-market buyers shows the poor economic climate and rising prices have pushed 40 per cent of car buyers to delay their vehicle purchase – with the majority of those not looking to buy a car until next year.
‘This is detrimental to an industry that employs 781,000 people across the country and contributes more than £14bn to the UK economy in added value.
‘While tax cuts and energy price freezes for both consumers and businesses will provide relief and increase spending in the short run, the government needs to consider the long term health of the industry which is set to become all-electric within the next decade.
‘This will require significant investment and spending, which is hard to justify against the economic backdrop of a recession and rising interest rates.’
Despite the concerns, Vertu boss CEO Robert Forrester appeared to give his seal of approval to the plans on Twitter.
He retweeted a post which read: ‘What an excellent statement from @KwasiKwarteng. Proper tax cuts. Reforms in the pipeline on infrastructure & enterprise. IR35 burdens to be abolished. A focus on growth and improving our economy’s productive capacity. And all delivered with huge intellectual confidence.’
What an excellent statement from @KwasiKwarteng.
Proper tax cuts. Reforms in the pipeline on infrastructure & enterprise. IR35 burdens to be abolished. A focus on growth and improving our economy’s productive capacity.
And all delivered with huge intellectual confidence.
— David Frost (@DavidGHFrost) September 23, 2022
The package enacting Liz Truss’s tax-cutting promises including reversing the national insurance rise and axing the hike to corporation tax came a day after the Bank of England warned the UK may already be in a recession.
Those within the automotive industry recently expressed fears that such a scenario could lead to used car prices being driven down.
Kwarteng said the government’s economic vision would ‘turn the vicious cycle of stagnation into a virtuous cycle of growth’.
By terming it a ‘fiscal event’ rather than a full budget, Kwarteng avoided the immediate scrutiny and forecasts of the Office for Budget Responsibility.
Reacting to the announcement, shadow chancellor Rachel Reeves said: ‘The chancellor has confirmed that the costs of the energy price cap will be funded by borrowing, leaving the eye-watering windfall profits of the energy giants untaxed.
‘The oil and gas producers will be toasting the chancellor in the in the boardrooms as we speak while working people are left to pick up the bill.’
