U.K. Treasury announces income-tax cuts, Ahead of an election that is scheduled for early next year, the U.K. government on Wednesday announced income tax cuts that it hopes will help spark a stagnating economy. However, the budget watchdog predicted a weak return to growth.
U.K. Treasury Chief Jeremy Hunt informed lawmakers during his yearly budget speech that the national insurance income tax’s primary rate will decrease from 10% to 8% starting next month.
The government’s fiscal watchdog, the Office for Budget Responsibility, left its projections for borrowing over the next few years largely unchanged despite the fact that this will reduce tax revenues for the government. This is because inflation is cooling off sooner than anticipated, which will lower interest payment costs.
U.K. Treasury announces income-tax cuts, Despite suffering two consecutive quarters of contraction in the second half of 2023, the U.K. economy is beginning to grow again. The OBR increased its growth estimate for 2024 on Wednesday, but only to 0.8% from its November estimate of 0.7%. It has revised its growth prediction for the economy to 1.9% in 2025 from 1.4%.
Both the American and European governments borrowed a great deal during the Covid-19 pandemic. In order to help people and businesses survive the spike in energy prices that followed Russia’s invasion of Ukraine in February 2022, governments throughout Europe also increased their debt.
Yet, the governments of the United Kingdom and other European nations have promised to pay down those debts in the upcoming years. According to the OBR, the U.K. government is still on course to fulfill the self-imposed fiscal rule that calls for a decline in debt as a percentage of GDP in the fifth year following the announcement of the budget.
U.K. Treasury announces income-tax cuts. In contrast to its November estimate of 3% of GDP, the OBR stated that the government is expected to have a budget deficit equal to 3.1% of GDP in the fiscal year ending in April 2025.
It projects that the budget deficit will have decreased to 1.2% of GDP by the fiscal year that ends in April of 2029. Because of this, the OBR predicted that in the fiscal year ending in April 2029, the government’s underlying debts will decrease from 93.2% of GDP to 92.9% of GDP.
