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You can find the current article at its original source at https://www.theguardian.com/uk-news/2018/oct/29/philip-hammond-delivers-tax-cut-bonanza-to-higher-earners
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| Philip Hammond delivers tax cut bonanza to higher earners | Philip Hammond delivers tax cut bonanza to higher earners |
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| If you are earning £50,000 a year, the chancellor has just handed you a £860 income tax cut – or six times the £130 that will go to someone who earns £12,500 a year – as the centrepiece of a mildly giveaway budget haunted by the prospect of Brexit and anaemic economic growth. | If you are earning £50,000 a year, the chancellor has just handed you a £860 income tax cut – or six times the £130 that will go to someone who earns £12,500 a year – as the centrepiece of a mildly giveaway budget haunted by the prospect of Brexit and anaemic economic growth. |
| The income tax cuts will cost £2.7bn next year and line the pockets of the better off far more than those on lower incomes. The 20% tax band currently starts on earnings above £11,850, and when that rises to £12,500 next year someone earning around that mark will be better of by £130. That’s because they can earn another £650 without paying tax at 20%. | The income tax cuts will cost £2.7bn next year and line the pockets of the better off far more than those on lower incomes. The 20% tax band currently starts on earnings above £11,850, and when that rises to £12,500 next year someone earning around that mark will be better of by £130. That’s because they can earn another £650 without paying tax at 20%. |
| But the big increase is in the point at which higher rate, 40% tax, will begin. This will jump from £46,350 to £50,000 from April. So if you earn £50,000, that’s an extra £3,650 that will be taxed at 20% rather than 40%, which adds up to a £730 cut. Together with the £130 gain from the basic personal allowance that is a total giveaway of £860. | But the big increase is in the point at which higher rate, 40% tax, will begin. This will jump from £46,350 to £50,000 from April. So if you earn £50,000, that’s an extra £3,650 that will be taxed at 20% rather than 40%, which adds up to a £730 cut. Together with the £130 gain from the basic personal allowance that is a total giveaway of £860. |
| Some of this gain will be clawed back by changes to national insurance – which were not mentioned in the budget. The starting points for national insurance will rise only in line with inflation, or much less than the income tax giveaway, while on those earnings between £46,350 and £50,000 there will be 12% NI to pay. Accountants suggest that the £50,000 earner will be around £520 a year better off once NI is taken into account. | Some of this gain will be clawed back by changes to national insurance – which were not mentioned in the budget. The starting points for national insurance will rise only in line with inflation, or much less than the income tax giveaway, while on those earnings between £46,350 and £50,000 there will be 12% NI to pay. Accountants suggest that the £50,000 earner will be around £520 a year better off once NI is taken into account. |
| Chancellors proudly report how many low earners they are lifting out of the tax net, but the biggest beneficiaries are always further up the income scale. The budget documents state that while the 26 million basic rate taxpayers will on average gain £20, the 4 million higher rate taxpayers will gain 11 times more – £228. | Chancellors proudly report how many low earners they are lifting out of the tax net, but the biggest beneficiaries are always further up the income scale. The budget documents state that while the 26 million basic rate taxpayers will on average gain £20, the 4 million higher rate taxpayers will gain 11 times more – £228. |
| For the very well off, the gains taper out – anyone who earns above £125,000 a year will have all their personal allowance tapered down to zero and will gain nothing from these changes. | For the very well off, the gains taper out – anyone who earns above £125,000 a year will have all their personal allowance tapered down to zero and will gain nothing from these changes. |
| Hammond was determined to avoid the Halloween headlines, but at times this zombie budget veered into pantomime, with lengthy segments of the speech devoted to potholes and public loos, and little to personal finance. | Hammond was determined to avoid the Halloween headlines, but at times this zombie budget veered into pantomime, with lengthy segments of the speech devoted to potholes and public loos, and little to personal finance. |
| The Tory papers used to bash Gordon Brown relentlessly as the stealth tax raiser. There was some truth to this – he was very good at diversifying the sources of tax revenue. But as the Conservative party has placed any increase in income tax off limits, Conservative chancellors have followed the Gordon Brown model and gone searching for it everywhere else. | The Tory papers used to bash Gordon Brown relentlessly as the stealth tax raiser. There was some truth to this – he was very good at diversifying the sources of tax revenue. But as the Conservative party has placed any increase in income tax off limits, Conservative chancellors have followed the Gordon Brown model and gone searching for it everywhere else. |
| If you feel that, despite cuts in income tax more of your money still manages to disappear in tax, you’re probably right. Taxes on home, motor and travel insurance policies have shot up, and last month alone brought in a record £1bn. Air passenger duty has taken off in the same way, with a further rise on long-haul flights announced on Monday. | If you feel that, despite cuts in income tax more of your money still manages to disappear in tax, you’re probably right. Taxes on home, motor and travel insurance policies have shot up, and last month alone brought in a record £1bn. Air passenger duty has taken off in the same way, with a further rise on long-haul flights announced on Monday. |
| Once again fuel duty and beer duty were frozen. These have become political no-go areas, despite the huge hit to government revenues. Back in 1999/00 fuel duty brought in £23bn, equal to nearly half of the total amount we paid in VAT. Last year they brought in £28bn, or just a fifth of what we now pay in VAT. Drivers may whinge about the amount of tax on petrol, but the reality is that it has been falling in real terms for many years now. | Once again fuel duty and beer duty were frozen. These have become political no-go areas, despite the huge hit to government revenues. Back in 1999/00 fuel duty brought in £23bn, equal to nearly half of the total amount we paid in VAT. Last year they brought in £28bn, or just a fifth of what we now pay in VAT. Drivers may whinge about the amount of tax on petrol, but the reality is that it has been falling in real terms for many years now. |
| It’s wine drinkers who should be whinging. They will pay another 7p tax on a bottle of wine, which may not sound a lot but comes after relentless increases in recent years. Wine duty now earns around £4.3bn for the Treasury, or £1bn more than it picks up from beer, and is beginning to catch up on tobacco. Yet again, the chancellor raised duty on cigarettes, but it’s having the desired effect. Revenue from tobacco duties has fallen steadily from its peak in 2012 – but if it finally disappears in a puff of smoke as we all quit smoking that’s something everyone can cheer. | It’s wine drinkers who should be whinging. They will pay another 7p tax on a bottle of wine, which may not sound a lot but comes after relentless increases in recent years. Wine duty now earns around £4.3bn for the Treasury, or £1bn more than it picks up from beer, and is beginning to catch up on tobacco. Yet again, the chancellor raised duty on cigarettes, but it’s having the desired effect. Revenue from tobacco duties has fallen steadily from its peak in 2012 – but if it finally disappears in a puff of smoke as we all quit smoking that’s something everyone can cheer. |
| Budget 2018 | Budget 2018 |
| Philip Hammond | Philip Hammond |
| Tax and spending | Tax and spending |
| National insurance | National insurance |
| Budget | Budget |
| Income tax | |
| analysis | analysis |
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