The government is considering a series of further tax cuts that could hand thousands of pounds to high earners, shortly after it announced the biggest giveaway in 50 years.
Plans under consideration could include bringing back a tax-free allowance for workers paid more than £100,000 a year, and lifting the amount pensioners can save before taxes kick in, the Sunday Telegraph reported.
The chancellor, Kwasi Kwarteng, on Friday delivered a mini-budget with tax cuts that will benefit many of the highest earners in the UK. Although it was not a full budget, it represented the biggest tax-cutting fiscal event since 1972 under another Conservative chancellor, Anthony Barber.
As part of the mini-budget, Kwarteng announced a review aimed at producing a “more pro-growth tax system” that would also be simpler. On Sunday, he appeared to signal that further tax cuts were under consideration, despite a hostile financial market reaction that suggested investors have concerns about the sustainability of UK government finances. On Friday, the pound slumped 3.5% to below $1.09, a 37-year low, and government borrowing costs increased markedly.
Kwarteng told BBC One’s Sunday with Laura Kuenssberg programme that there was “more to come” from the new government. “We have only been here for 19 days. I want to see, over the next year, people retain more of their money,” he said.
Plans under consideration could include removing “pinch points” where people face higher marginal tax rates on extra earnings, the Sunday Telegraph reported.
One such policy could be reinstating the income tax personal allowance for workers paid more than £100,000 – a move that would hand about £5,000 to high earners. People paid between £100,000 and £125,000 pay a marginal rate of income tax of 60% on those earnings, as the allowance is removed, compared with the 40% higher rate.
Another policy could include abolishing the high income child benefit charge. The charge, introduced under the former Tory chancellor George Osborne, is designed to withdraw child benefits from wealthier families.
The government is also reportedly considering lifting the lifetime allowance for pensions. Pensioners pay tax of up to 55% on pension pots worth more £1,070,000. The measure was introduced to prevent very high-paid workers from gaining disproportionately from pension tax relief, but the allowance was cut from an initial threshold of £1.5m. The policy has faced criticism for preventing some people from saving.
A Treasury source cautioned that the tax review had only just started, and the government had not started deciding on specific measures.
