Jeremy Hunt doing the media rounds this morning, when he warned ‘horrible decisions’ were coming (Picture: BBC/PA)
The Chancellor has warned that he will be acting like famous miser Scrooge this Christmas, with ‘horrible decisions’ ahead about tax and spending.
As headlines predicted the threshold at which people pay the highest rate of income tax would be lowered, Jeremy Hunt did little to dispel the speculation.
He told Sky News this morning that we’re all going to be paying a bit more tax’ following the autumn budget on November 17.
On who will be required to bear the brunt of the extra costs, he said the Government will be asking ‘everyone for sacrifices’, but said Britain is a ‘compassionate’ country, insisting ‘there’s only so much you can ask from people on the very lowest incomes’.
It comes after The Times reported that the prime minister is set to reduce the amount of income required before a 45p rate of tax kicks in.
Currently, the highest rate is £150,000 but the government is said to be mulling over making it £125,000 instead.
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Accountants Moore Kingston Smith worked out that this would mean an additional 246,000 people will find themselves paying the highest rate of tax, costing them an extra £580 a year on average.
For the 629,000 people already eligible to pay the highest rate, their bills would rise by £1,250.
Changing the threshold could net the government £1.3 billion a year, it is estimated.
This is a big change from Kwasi Kwarteng’s ‘mini-budget’, where instead of asking more people to pay the 45p rate, the government wanted to scrap it altogether.
Without explicitly lowering other tax thresholds, Mr Hunt is thought to be considering an extended freeze on income tax and national insurance thresholds.
This is known as a ‘stealth tax’, meaning the figure looks the same but as it would not rise in line with inflation, people earning less in real terms would start paying more tax.
Mr Hunt is also expected to announce that drivers will electric cars will have to pay tax for the first time.
Currently, owners of cars with no emissions are exempt from vehicle excise duty.
Capital gains tax (due when people sell an asset, such as a home that isn’t their main residence, for profit) is predicted to also be targeted. The CGT tax free allowance is set to halve from £12,300 to just over £6,000.
Current income tax brackets in England, Wales and Northern Ireland
Personal Allowance: Earnings up to £12,570 taxed at 0%
Basic rate: Earnings between £12,571 and £50,270 taxed at 20%
Higher rate: Earnings between £50,271 and £150,000 taxed at 40%
Additional rate: Earnings over £150,000 taxed at 45%
In an interview with the Sunday Times, Mr Hunt suggested he will not be pulling any rabbits out of the hat when he delivers his statement.
‘I think it is fair to say this is going to be the first rabbit-free budget for very many years,’ he said.
He warned people can expect some ‘very horrible decisions’ as part of a bid to ‘get us back into the place where we are the fantastic country that we all want to be’.
‘I’m Scrooge who’s going to do things that make sure Christmas is never cancelled,’ he declared.
Mr Hunt also said he thinks an official recession is ‘likely’ after GDP shrank by 0.2% between July and September.
‘The question is not really whether we’re in recession, but what we can do to make it shorter and shallower,’ he added.
He insisted the ‘number one thing’ he can do on Thursday is help tackle sky-high inflation.
‘If we can, with the Bank of England, control inflation, then we will be able to contain the global rise in interest rates, contain the rises in mortgage rates that people are seeing, contain the cost of loans that businesses borrow, and have a chance of getting back on track,’ he said.
In a sign of what is to come on Thursday, Mr Hunt said ‘people with the broadest shoulders will bear the heaviest burden’.
Asked if he will therefore be paying more tax after next week, he told Sky News: ‘We’re all going to be paying a bit more tax, I’m afraid … but it’s not just going to be bad news.
‘I think what people recognise is that if you want to give people confidence about the future, you have to be honest about the present. And you have to have a plan.
‘This will be a plan to help bring down inflation, help control high energy prices and also get our way back to growing healthily, which is what we need so much.’
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It comes after reports he is set to reduce the amount of income required before a 45p rate of tax kicks in.
