What does an income tax cut mean for you?
In the Spring Budget Jeremy Hunt, the Chancellor Exchequer has been hinting that there could be tax cuts coming up.
What is income tax?
Income tax is the tax you have to pay on your annual earnings or, if you’re self-employed, any profit you make. Depending on how much you earn determines how much income tax you pay. So, the more you earn, the more money you are paying in tax.
Income Tax is used to pay for public services and is the main source of income for the Government. The NHS, railway systems, education and more is paid for using income tax.
You are placed in band based off of what you earn, decided by HMRC, who collects the tax and the higher you earn, the higher your band, the more you pay and so the amount is as fair as possible.
The band you are in decides your tax code and therefore how much you can earn tax-free before you begin paying taxes on your earnings so, you could earn up to £12,570 before being taxed if your tax code is 1257L.
Why would the government cut it?
The government wants to cut taxes to relieve financial burdens across the UK however it has been suggested that there may not be enough money to do this.
With the elections coming up this year, the government is eager to make decision which will increase their poll numbers. As the UK entered a recession, the conservatives are under pressure to alleviate the financial pressures on the public.
What this means for your money?
If Hunt decides to cut income taxes then there will be the question of, what will pay for the public sector such as, the NHS? This could be spending cuts or using alternative funds.
If income tax is cut this will mean you will keep more of what you earn and be better off financially.
A tax cut will mean a decrease of how much you pay and will not altogether abolish income tax, they have been hinting at a 1p cut which could be beneficial to many.
On March 6th the Spring budget will be announced and we will find out what plans the government have made.