Income tax will be cut by one penny Chancellor Kwasi Kwarteng has announced, as part of a raft of measures aimed at boosting economic growth.
The reduction in the basic rate from 20% to 19% will be introduced in in April 2023 – one year earlier than planned.
At the same time, the 45% top rate of tax will be abolished with a single higher band of 40%.
The planned increase in corporation tax from 19% to 25% will also be axed, while stamp duty will be cut for homebuyers.
The chancellor had already confirmed the National Insurance hike introduced by Boris Johnson’s government to pay for social care and tackling the NHS backlog will be reversed on 6 November.
In his statement, he also announced that:
- Duty frozen on beer, wine, cider and spirits
- Caps on bankers’ bonuses will be axed as part of wider City deregulation
- New investment zones will be created with targeted tax cuts and relaxed planning laws
The government argues the action being taken will help bolster economic growth and increase the tax to fund public services.
But critics argue the measures are a risk when public debt is already high and the cost of borrowing is rising.
The Institute for Fiscal Studies has said the strategy to drive growth was “a gamble at best” and that ministers risked putting the public finances on an “unsustainable path”.
The chancellor has faced criticism for refusing to publish an economic forecast by the independent Office for Budget Responsibility (OBR) alongside the mini-budget, sparking claims he is avoiding scrutiny.
The lack of OBR data means there will be no independent analysis of whether the announcements breach the government’s existing budget rules or their impact on growth.
Earlier this week, Liz Truss said she is willing to be an unpopular prime minister to bring in measures she believes will grow the economy.