LONDON: The British government announced today plans to freeze income tax allowances and lower the threshold at which people start to pay the highest rate of income tax, in order to stabilise public finances.
Finance minister Jeremy Hunt said he would freeze income tax allowances until 2028 and was lowering the threshold above which the 45% top rate of income tax is paid to £125,140 from £150,000.
Hunt said that he is “asking more from those who have more” as he also set out plans to freeze the thresholds for national insurance and inheritance tax.
Those earning more than £150,000 will pay just over £1,200 extra a year.
“Even after that, we will still have the most generous set of tax-free allowances of any G7 country,” Hunt told parliament in a speech on the public finances aimed at restoring market confidence in the government’s finances after the 50-day premiership of Liz Truss.
Her government had said it would abolish the top rate of income tax, before reversing course amid financial turmoil triggered by her plans.
She was forced to resign last month and was replaced by Rishi Sunak as prime minister.
The Conservatives announced in their election manifesto 2019 that they would not raise the rates of income tax or national insurance.
Hunt said although his announcement will lead to “substantial” tax rises, the government had not raised the headline rates of taxation.
The government also announced it would cut the amount shareholders can earn in dividends before they begin paying tax from the current level of £2,000 to £1,000 next year and £500 from 2024.
The amount people can claim tax-free for capital gains will fall from £12,300 currently to £6,000 next year and £3,000 in 2024, Hunt said.
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