We’ll be £604 better off a year due to mini Budget tax cuts
NEW parents Amelia Welford and Jordan Sykes will be £604 better off a year thanks to mega mini Budget tax cuts announced this week.
The couple will be better off due to the National Insurance rate hike being axed, and the cut to income tax.
National Insurance increased by 1.25 percentage points in April this year, jumping from 12% to 13.25% – but this will be reversed in November, Chancellor Kwasi Kwarteng said in Friday’s mini Budget.
He also announced an income tax cut – which means the basic rate of income tax you pay in the pound will drop from 20p to 19p.
The couple, who live in Redcar, North Yorkshire and have a four-month old baby, called Blossom will be making savings as a result of the tax cuts.
“We’re saving £604 – that’s worth three quarters of our monthly mortgage repayments so it’s a big amount,” Amelia said.
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“The savings we’ll make will probably all go on bills – but hopefully we might be able to buy Blossom a few more Christmas presents too.”
Both are basic rate tax payers – Amelia, 24, is a midwife and earns £31,000 a year, while Jordan, 23, is a waste refuse operative and earns £21,000.
It means that means that Jordan will save £105 a year thanks to the tax cut, with Amelia saving £230, according to Hargreaves Lansdown estimates.
They are both set to benefit from an income tax cut too.
It means that Jordan will save £84.30, and Amelia £184.30.
The extra cash will come in handy for the couple, who have seen their budgets ravaged by the cost of living crisis.
They sometimes run out of money for groceries, and worry about getting by.
The cost of nappies, wipes and clothing for their four-month-old baby, Blossom, has eaten into their savings because they don’t have enough money to get by each month.
“We are really struggling financially,” midwife Amelia, 24, said.
“If we get halfway through the month and can’t afford a big food shop, we’ll go to our parents houses and have tea there.
“I’ve taken out an overdraft which I’ve never needed to do, even when I was a student – I’m mortified about, but without it, I wouldn’t be able to afford everything.”
Amelia maxes out her £2,500 overdraft each month, and when it’s payday, she’s still in the red.
She and waste refuge operative, Jordan, 23, are terrified about energy bills going up in winter.
“It’s awful, we’re both in good jobs, but at the minute, we’re not feeling the benefit,” she said.
“We’re not going to be able to afford heating, we’ll have to put dressing gowns on, extra socks, and extra blankets.”
How will you benefit from the income tax cut?
Around 31million people are set to get £170 put back into their pockets after Mr Kwarteng announced a big income tax cut.
He confirmed a 1p cut to the basic rate of income tax, which will roll out in April next year.
It means that the basic rate of income tax you pay in the pound will drop from 20p to 19p.
The cut in the basic rate of income tax applies to people who earn between £12,571 to £50,270.
Data provided by Blick Rothenberg suggests it will save:
- Those earning £15,000 a year £24.30 a year
- Those earning £25,000 a year will save £124.30
- Workers with incomes of £35,000 a year will save £224.30
- Those earning £50,000 a year will save £374
Workers only start paying income tax once they start earning over the personal allowance – which currently stands at £12,570.
Any income earned up to £12,570 is tax-free.
How will you benefit from the National Insurance hike reversal?
Millions of households have been given a tax cut worth hundreds of pounds after the Chancellor reversed the National Insurance rate rise.
The exact amount that you will save will depend on how much you earn.
Personal finance experts at Hargreaves Lansdown crunches the numbers for The Sun on how much different earners will save:
- Those on £20,000 will save £93 a year
- Individuals earning £30,000 a year will save £218 a year
- Those on £40,000 will save £343 a year
- Those on £50,000 will save £468 a year
- Individuals on £60,000 will save £593 a year
- Lower earners, on less than £12,570 a year, won’t benefit from the change
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Here’s the exact amount your pay will rise by in November after the National Insurance rate rise was scrapped.
Low-tax investment zones were also announced for businesses – but it could see more jobs and houses being built.