The chancellor’s plan to cut income tax is nothing but ‘smoke and mirrors’

Nimesh Shah
Nimesh Shah

Rishi Sunak’s proposals to reduce the basic rate of income tax by 2p in 2024/25 has been described by tax and advisory firm Blick Rothenberg as nothing but “smoke and mirrors” as the government starts to prepare for the next general election.

Nimesh Shah, CEO at the firm, believes that Sunak’s plans to cut the basic rate income tax, if they are taken forward, will do little reform the personal tax system and merely “manipulates the tax system for political gain”.

He said: “Reports over the weekend suggest Rishi Sunak is proposing a cut to the basic rate of income tax by 1p in 2023/24 and a further 1p reduction in 2024/25, taking the basic rate from 20% to 18%.”

“An individual earning £30,000 would be £349 per annum better off in 2024/25 compared to the current tax year under the proposals, but this doesn’t tell the whole story.”

Rishi Sunak
Rishi Sunak

Nimesh continued: “A 1% cut in the basic rate of income tax would cost the government £6 billion, but the government has moved to raise an estimated additional £70 billion by 2025/26 through freezing personal tax allowances and the introduction of the new 1.25% Health and Social Care Levy, which comes into effect from April 2022.

“For someone earning £60,000, the 2% income tax cut will be worth £754 compared to the current tax year; however, when you factor in the 1.25% Health and Social Care Levy, it is only worth £165.  In fact, a person earning £60,000 will see their net income reduce by £589 from April 2022 compared to the current tax year.”

“This is a tactical move by Rishi Sunak to essentially give something back which Boris Johnson took away when he announced the Health and Social Care Levy in September,” he added.

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