If we had a delicate flower called the UK economy then we call a draught the equivalent of a sharp frost
The Chancellor would normally have the OBR run the numbers, even the SNP offered to check the numbers at a high level because of the tight timeline for the announcement.
The analogy is “ a room with ranging fire and on the opposite wall an air-conditioner at full blast”. We will leave the markets and the politicians to sort this one way out one way or another.
Markets never like uncertainty this will impact all tax payers in differencing degrees.
Hopefully only a few short words in history!
The concept of reducing tax burden is logical to increase choice and demand but cannot be taken in isolation, it is part of big plan.
What happened was set out to reduce the basic rate of income tax to 19% and in a surprise move abolished the 45% tax rate.
With the new plans, the additional tax rate of 45% has been abolished leaving a single higher rate tax band at 40%, creating a significant tax cut for those earning over £150,000 from April 2023.
Combined with, the 1.25% increase in national insurance for employees and employers has been cancelled, effective from 6 November.
With the impact of the introduction making tax digital the HMRC will have line of sight of the tax take, combined with reduction of cash being used will itself provide more information. These tax cuts have an impact across the board impact with more gains for most earners, although the highest earning 600,000 taxpayers will benefit the most with on average tax savings of £6,000 or more.
However, this cannot be taken in isolation, as the impact on low earners is less impactful. Many low wage earners are concerned with energy cost which the Govt has capped the rate per therm: not the total cost so if consumers don’t reduce consumption, they will still face fuel poverty.
Combined with rising inflation many tax payers who were not even born in the 1970s with high interest rates and inflation. This has led to money becoming risk off due to uncertainty and volatility.
What it does mean it so important to understand a life plan and have tax plan that holds good in all the uncertain times presented.