Friday 1 July 2022 03:15 AM No 10 mull over VAT cut to try and help households battle the cost of living ... trends now

Friday 1 July 2022 03:15 AM No 10 mull over VAT cut to try and help households battle the cost of living ... trends now
Friday 1 July 2022 03:15 AM No 10 mull over VAT cut to try and help households battle the cost of living ... trends now

Friday 1 July 2022 03:15 AM No 10 mull over VAT cut to try and help households battle the cost of living ... trends now

Downing Street are considering cutting VAT in a bid to help struggling families battle the cost of living crisis but the Treasury has warned it could fuel inflation.

The proposals to cut VAT from the headline figure of 20 per cent could reduce the tax bill for millions of people across the country and help ease the pressures faced by households as the cost of living crisis continues.

According to the Times, Steve Barclay - the Prime Minister's chief of staff - suggested reducing the rate on a temporary basis.

However, the newspaper reports that the Treasury has warned the move could end up fuelling inflation by overstimulating the economy. 

Inflation, which reached 9.1 per cent last month, is at its highest in four decades, contributing to strikes or threats of industrial action by workers across transport services, schools, postal services and hospitals. 

It comes after official figures showed the number of people expected to be subjected to the higher tax bracket will reach 6.1million this year.

Pictured: Steve Barclay - the Prime Minister's Chief of Staff arriving at Downing Street

Pictured: Steve Barclay - the Prime Minister's Chief of Staff arriving at Downing Street 

When Boris Johnson won the 2019 general election, some 4.3million people were paying the higher rate.

Experts warned it could hit more than seven million by 2024 – meaning one in five taxpayers would be on higher rates, an increase of around 70 per cent in this Parliament, according to the pension consultancy LCP. 

LCP partner Sir Steve Webb, a former pensions minister, said: 'Paying higher-rate tax used to be reserved for the very wealthiest, but this has changed.

'People who would not think of themselves as being particularly rich can now easily face an income tax rate of 40 per cent.'

Chancellor Rishi Sunak and Boris Johnson are facing mounting pressure to set out a timetable for tax cuts. 

Last year, Mr Sunak froze the top income tax thresholds until 2026 – a move criticised as a pay cut in real terms for millions of families already hit by cost of living increases.

Chancellor Rishi Sunak and Boris Johnson are facing mounting pressure to cut taxes

Chancellor Rishi Sunak and Boris Johnson are facing mounting pressure to cut taxes

According to the Times, in his letter to party lawmakers on the day of a confidence vote last month, Boris Johnson said energy would be devoted to 'reducing the biggest single household outgoing of all — the tax bill'.

He added: 'It must come down, and it will, because that is the best way to deliver the growth we need.'

There were 31.5million people paying income tax in 2019/2020. This is expected to rise by 2.5million to 34million by 2022/2023, according to HMRC.

Some 80 per cent pay the basic 20 per cent rate of tax. Those on the higher rate 40 percent tax are projected to hit 5.5million in the 2022/2023 tax year – up 44 per cent in three years.

The number of top earners paying 45 per cent income tax is expected to rise by almost half to 629,000 over the same period.

The tax-free personal allowance is £12,570. The 40 per cent higher rate kicks in on salaries of £50,270 or more, and the additional 45 per cent rate at £150,000. The latest Office for National Statistics figures show that average wage growth was 6.8 per cent year on year.

Real household disposable income was down 0.2 per cent between January and March, as income growth of 1.5 per cent was outstripped by household inflation of 1.7 per cent. It is the longest sequence of drops since official figures started being compiled in 1955

HMRC figures have shown nearly two million people have been dragged into the higher and additional rates of tax over the past three years

HMRC figures have shown nearly two million people have been dragged into the higher and additional rates of tax over the past

read more from dailymail.....

PREV Unruly tourists face €3,000 fines for anti-social behaviour under latest ... trends now
NEXT City of Miami Beach posts 'breakup' video to spring breakers who 'just want to ... trends now