Savings

How a Liz Truss win could affect your taxes, bills and savings

Rishi Sunak or Liz Truss will be announced as new Prime Minister on Monday. Photo: Hannah McKayh/Reuters

Liz Truss promised that cash-strapped families will get more help to pay the rise Cost of life. If she becomes the next Prime Minister (PM), there will be tax cuts in the form of scrapping the National Insurance hike, suspending corporation tax hikes and scrapping eco-levies. energy billsas she has committed herself to throughout the campaign.

Truss is also planning a freeze on energy bills after his scheduled election as the new Conservative leader and next Prime Minister.

The Conservative leadership favorite has vowed never to introduce new taxes as Prime Minister as she faces criticism for failing to outline her plan to tackle the cost of living crisis.

She said there would be ‘no new taxes’ under her premiership and avoided an additional windfall tax on oil and gas companies.

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Truss said she would spend billions of pounds to support vulnerable households and small businesses during the cost of living crisis, although the payments would be temporary.

Energy bills

Truss pledged to be “pro-business” and promised to take action to ensure local businesses and shopping streets can survive rising energy prices.

“I’ll be looking at all levels to make sure we’re increasing supply and therefore addressing the root cause of the problem rather than just putting a band-aid on,” she said. “But I would absolutely seek to act on the energy costs of companies.”

Truss told BBC One’s Sunday With Laura Kuenssberg she would provide immediate help with energy bills if elected, but declined to say how.

Energy bills continue to rise.

Energy bills continue to rise. Chart: Yahoo

“In a week, I will make sure there is an announcement on how we are going to deal with energy bills and long-term supply, to put this country on a good footing for the future. winter,” Truss said.

“I understand that people are struggling, that businesses are also worried about their energy bills and the impact that might have on their future.”

A range of options have been hammered out in Whitehall to help struggling households and a freeze on energy bills is among a range of options due to be presented to the new Prime Minister this week.

Permanent personal tax changes – reversing the rise in NICs

Truss said it would reverse the increase in National Insurance (NIC) contribution rates, at a cost of £13billion a year. The Institute for Fiscal Studies (IFS) said it would boost incomes across the board, but benefit high-income households who derive the most income from employment.

Showed calculations that his planned reversal of a recent National Insurance increase would benefit the highest earners by around £1,800 a year, and the lowest earners by around £7, and asked if this was fair , Truss said, “Yeah, that’s right. ”

Read more: What the new Chancellor should do to help struggling households

She said: ‘People at the top of the income distribution pay more tax, so inevitably when you cut taxes you tend to benefit people who are more likely to pay tax.

Rachael Griffin, tax and financial planning expert at Quilter, said: “Truss has also made headlines when he says he wants to scrap the National Insurance hike on day one in office.

“However, she has so far put forward no proposal on how the planned welfare reforms will be paid for without the increase. With huge energy price hikes on the horizon, it is understandable to want to lower the NI. However, abandoning the hike could well lead to a situation where Truss robs Peter to pay Paul if she wants to maintain the planned welfare reforms”

VAT reduction

Truss also indicated his interest in further tax cuts, promising to “review the taxation of families to ensure that people are not penalized for taking time off to care for children or elderly parents. “.

She also said she would review inheritance tax as part of a general overhaul of the UK tax system.

There are rumors that Truss is considering reducing VAT by 5% and significantly reducing income tax. However, when asked if she was considering reducing VAT, Truss replied: “I don’t rule things out. . . I’m not sitting here writing a budget or a tax event.

The step is seen as a “nuclear” option, with other options being considered, including a 2.5% reduction in VAT, from the current standard rate of 20%.

Additional temporary support — a moratorium on green energy taxes

To provide additional immediate support, Truss said she would have a “temporary green energy tax moratorium.”

According to Ofgem, a combination of various levies increased a household’s energy bills with typical energy consumption of £153 per year – although this figure changes over time and varies with energy consumption Household.

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Truss did not say when the temporary moratorium would begin and end or what levies on energy bills would be suspended.

Corporate taxation – cancellation of the corporate tax hike

The March 2021 Budget announced an increase in the main rate of corporation tax, from 19% to 25%, from April 2023, for businesses with annual profits of more than £250,000.

Truss wants it overturned, saying a lower tax rate would strengthen incentives to invest in the UK and thus promote economic growth, helping to recoup some of the initial cost of the tax cut.

Repression of benefits

Truss responded to calls to “fix the benefit system” by saying she would “change the incentives” under the benefit to get more people into work.

pensions

Truss has already expressed his commitment to the triple lockdown, which could be a sigh of relief for retirees.

Millions of people have seen the real value of their public pension income fall due to inflation and will be banking on the return of the triple lockdown next year.

The state pension is set to rise by a double-digit percentage as inflation continues to soar, providing a huge boost for the elderly.

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“Truss will struggle to balance the books if she is to stay true to the Tory manifesto of maintaining the triple lockdown for years to come in light of soaring inflation and her desire not to add further taxes and reduce existing ones,” Jon Greer, Quilter’s retirement policy manager, said.

“It will end up calling into question how future welfare reforms will also be funded. Something may have to give and pensioners across the country are hoping it doesn’t start with the triple lockdown.”

family tax

At present, married or PACS couples who earn less than the current tax threshold of £12,570 can transfer 10% of the tax relief to their partner. This can reduce a couple’s tax bill by up to £252 a year.

Under Truss’ plan, anyone who is married or in a civil partnership could be able to transfer their entire tax relief to their partner, potentially saving couples and families hundreds of pounds in tax per year. year.

“A fully transferable allowance would mean one spouse could earn up to £25,140 tax-free if the other doesn’t earn money due to caring responsibilities. Although that’s not a bad idea in itself , this does not help the many families who have two working parents. With a potential recession looming, this looks like a strange policy that may not encourage people to enter the labor market and therefore stimulate economic growth said Quilter expert Griffin.

Read more: Energy bills: how to save on appliance running costs

Liz Truss’ emergency tax and spending pledges could cost more than £60billion a year, with experts warning they will fail to help those worst off with the rising cost of living .

The Resolution Foundation think tank said the tax cuts came at a high price and were ‘not a serious response to the current crisis’

Look: Liz Truss or Rishi Sunak will become the next Conservative leader and prime minister today