Britain’s Finance Minister Kwasi Kwarteng said on Thursday that a 1.25 percentage point increase in the social security tax that came into effect earlier this year would be reversed from November 6, setting the timeline for a previously promised move.
The announcement comes ahead of a mini-budget due Friday that is expected to include a raft of tax cuts as incoming Prime Minister Liz Truss implements an aggressive low-tax, pro-growth strategy after being elected Conservative Party leader earlier this month.
“Taxing our way to wealth has never worked. In order to raise living standards for all, we do not have to apologize as our economy grows,” Mr. Kwarteng said in a statement.
“Tax cuts are crucial for this.”
He also said the government will scrap plans to sever the Social Security increase and rename it the Health and Welfare Contribution, which is due to take effect in April 2023.
The 1.25 percentage point increase affected the tax rates levied on both employers and their employees and was expected to bring in £13bn (€14.87bn) a year.
Mr. Kwarteng will also remove an increase in dividend tax rates from April 2023, which was introduced along with the increase in payroll taxes to collect contributions from those paid through various channels.
During the campaign to replace former leader Boris Johnson, Ms Truss made clear her intention to reverse the surge in national insurance, which was put in place to fund a healthcare system struggling to cope with the backlog caused by the Covid-19 pandemic .
Ms. Truss and Mr. Kwarteng are banking on tax cuts to spur accelerated economic growth that offsets rising interest payments on the country’s national debt and huge spending on a package to help businesses and consumers pay their energy bills.
Ms Truss has promised to scrap a previously planned increase in corporate tax and according to unconfirmed media reports, the government may also announce a reduction in taxes paid on property purchases.
The measures come amid severe pressure on household budgets and a difficult economic outlook as energy costs push up inflation, falling real wages trigger industrial unrest and rising interest rates push up mortgage payments.
The Bank of England raised interest rates to 2.25% from 1.75% yesterday and said it would continue to respond to inflation “firmly as needed” even though the economy is likely already in a mild recession.
The government said overall health and social care funding would not be cut as a result of the changes. The extra money needed to make up the shortfall caused by the tax cancellation will come from general taxation, the Treasury Department said.
https://www.independent.ie/business/world/uk-to-reverse-national-insurance-tax-hike-as-pro-growth-plan-kicks-off-42010893.html UK to reverse social security tax hike as ‘growth’ plan begins