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How will the Governments tax changes affect you?

As of recent, the Government have made the executive decision to eliminate the 45% rate of Income Tax, National Insurance reversal and decrease Stamp Duty after Chancellor Kwasi Kwarteng recognised it was proving a “massive distraction.” This resulted in, members of the public feeling unsettled about how they will cope with the tax changes.

Income Tax 45% rate

Kwasi Kwarteng also known as the chancellor, has unveiled two big changes to the income tax system. It was announced that the basic rate of tax has been reduced from 20% to 19% as well as, getting rid of higher tax which was originally 50%. Previous to this, top-rate income tax for citizens earning more than £150,000 was reduced from 50% to 45%.

The Government have said, “it would have meant a tax cut for 660,000 people next year.”

Although there will be big tax changes for the majority of the UK, Scotland must abide by different systems. This is due to the Scottish Parliament having different income tax systems, bands and tax rates. The current top rate for residents earning over £150,000 is 46% and is not affected by Mr Kwarteng's announcements.

National Insurance reversal

Former prime minister Boris Johnson, as well as former chancellor Rishi Sunak, had already unveiled multiple changes to the system for the current tax year. Mr Kwarteng has already ensured to undo some of these.

Starting from November 2022 the National Insurance rates will decrease to their previous level before Boris Johnson and Rishi Sunak added a 1.25 per cent point surcharge was added. As a result of this, everyone will now pay rates of 12% and 2%, alternative to the current 13.25% and 3.2% which will now mean that the tax rate is the same as last year.

Stamp Duty

Chancellor Kwasi has confirmed the permanent changes taking place to change the price at which stamp duty is paid was doubled from £125,000 to £250,000.

The current rates are now as follows:

0%: £0 - £250,000 (£425,000 for first-time buyers)

5%: £250,000 - £925,000

10%: £925,000 - £1,500,000

12%: £1,500,000+

Kwasi added that the stamp duty will be discounted for first-time buyers and will now apply to properties costing up to £625,000 - up from £500,000

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