Mini-budget: When is it and what could be in it?

BBC - Business

Finance / BBC - Business 9 Views comments

By Ben King
Business reporter, BBC News

  • Published

CommutersImage source, Getty Images

Tax cuts and measures to boost to the economy are set to be unveiled in a mini-budget on Friday.

It comes as the UK faces a cost of living crisis and the prospect of a recession.

What could be in the mini-budget?

  • letting people keep more of their earnings by cutting National Insurance (NI)
  • scrapping a planned increase in the amount of tax companies pay on their profits
  • possible cuts to other taxes, including stamp duty which is paid on house purchases
  • ending the cap on bankers' bonuses
  • tightening the rules around universal credit
  • plans to boost economic growth, such as creating low-tax zones around the UK

The announcements will be made by new Chancellor Kwasi Kwarteng, who is in charge of the public finances.

The tax-cutting plans under consideration could cost at least £30bn.

What changes are expected to National Insurance?

NI was set to return to its old rate from April 2023 - to be replaced by a new Health and Social Care Levy at a rate of 1.25%. The levy will now not be introduced.

The NHS will still get the funding it was promised, but government is now expected to borrow the money rather than raise it from tax.

High earners will benefit most, as they pay the most NI. An NI cut won't help pensioners or those on low income or benefits because they don't pay the tax.

Chart showing the amount saved by employees in the first year by not introducing the health and social care levy

Which other announcements are expected?

Corporation tax

This tax is based on the annual profits that a company makes.

However, Ms Truss is set to cancel the rise.

Green levies

These charges fund schemes like insulation and renewable energy.

The prime minister has promised to temporarily scrap the levies, saving households about £150 each.

Income tax

A possible cut on the main tax on people's earnings could also be on the cards.

Universal credit

Mr Kwarteng is expected to announce a welfare shake-up to "get Britain working again".

This is set to include universal credit, a benefit payment paid to working-age people.

How does the government plan to boost growth?

The mini-budget could also see an end to the cap on bankers' bonuses. This was introduced across the EU in 2014 (when the UK was still a member) following the global financial crisis. Under the current rules, a banker's bonus cannot be higher than their annual salary - unless shareholders agree.

When asked if she would be happy to see bankers getting bigger bonuses, Ms Truss said she wanted to see a growing economy.

The government may also announce the creation of "special investment zones". Certain locations could be allowed to relax planning rules and reduce business taxes to encourage investment.

Can the UK afford to tax less and borrow more?

Critics, including Ms Truss' Conservative leadership rival Rishi Sunak, argue immediate tax cuts will require the government to borrow more.

The money, plus interest, will eventually need to be paid back by taxpayers.

However, Ms Truss argues tax cuts will help the economy grow - bringing in more money which will cover the cost of the amount borrowed.

Why is it being called a mini-budget?

Major decisions about tax and spending are normally made twice a year - in an autumn Budget Statement and a Spring Statement.

The Office for Budget Responsibility (OBR) - which gives independent advice to the government - normally publishes its own analysis of these statements. It sets out the cost of new policies, how much tax will be raised and what it means for the economy.

However, the government is refusing to publish the OBR's assessment alongside the mini-budget.

The Treasury said it "remain[s] committed to maintaining the usual two forecasts in this fiscal year, as is required".

A full-scale Budget is expected later this year, but no date has been set.

Get in touch banner

What are your questions on the cost of living crisis? What would you like to know about the chancellor's mini-budget? Email your questions to: haveyoursay@bbc.co.uk.

You can also send your questions in the following ways:

If you are reading this page and can't see the form you will need to visit the mobile version of the BBC website to submit your question or comment or you can email us at YourQuestions@bbc.co.uk. Please include your name, age and location with any submission.

bottom banner

Related Topics

Comments