Martin Lewis gives good news for workers earning less than £50,000
MARTIN Lewis has revealed positive news for households earning roughly £50,000 or less following the government's mini-budget.
The founder took to Twitter to offer an explainer on Chancellor Kwasi Kwarteng's raft of economic reforms.
The government announced a permanent stamp duty cut, removal of the cap on bankers' bonuses and a 1p cut to the basic rate of income tax from April 2023, among other measures.
It is hoped the new reforms will stimulate growth in the UK economy after years of stagnation.
And consumer champion Lewis said the cut to income tax was good news for those earning roughly £50,000 or less.
That's because the basic rate tax threshold will drop to 19% from 20%, which impacts those earning between £12,571 and £50,270 and over.
Read more in Money
However, Lewis added: "For anyone earning £50,000 and over, you don't really get any more gain.
"The gain is really on the income between £12,570 and £50,000."
It's important to bear in mind that people earning over the basic rate of income tax, so £50,270 and over, will also benefit from the 1% cut.
However, Lewis was explaining that you benefit more if you earn between £12,570 to £50,270 because you then don't fall into the higher rate tax bracket which is not being reduced.
Most read in Money
That's because those on the higher rate tax bracket are taxed 40% on earnings from £50,271 to £150,000 on top of what they are taxed on earnings between £12,570 to £50,270.
Over £150,000 you are taxed on 45% of your earnings on top of what you have already been taxed.
Lis Truss was originally going to cut that rate to 40%, but U-turned following a Tory backlash.
The change to the basic rate of income tax means the average worker will save £170 on average next year.
Kwasi Kwarteng's announcement came yesterday, September 23, as millions of households across the UK grapple with the cost of living crisis.
Food prices have shot up in recent months, and petrol prices remain high, despite falling significantly in the last few weeks.
What else did the government announce?
Stamp duty cut
The government announcement a permanent stamp duty cut yesterday, September 23.
Stamp duty land tax (SDLT) is a lump sum payment you have to make if you are buying a property over a certain financial threshold.
The rate a buyer has to pay depends on the price, type of property and whether or not they already own a home.
Previously, first-time buyers did not have to pay tax on homes costing less than £300,000.
After the government's announcement, that figure has now risen to £425,000.
Under the previous system, no stamp duty was paid on the first £125,000 of all property purchases, but the government has doubled that to £250,000.
The maximum value of a property on which first-time buyer's relief can be claimed has also increased from £500,000 to £625,000.
National Insurance contributions cut
Millions of households will save £330 a year on average after the government announced a cut to National Insurance (NI) contributions.
A 1.25% increase to NI will be scrapped from November 6.
The Chancellor said the tax cut would impact 28 million people.
Bankers bonuses ditched
Mr Kwarteng axed the cap on bonuses for city bankers as part of the mini-budget.
The Chancellor claimed scrapping the cap would give the British economy a much-needed boost.
A limit on bankers' bonuses was introduced by the EU following the 2007-2008 financial crash.
Before the change, bankers could only earn less than 200% of their salary as an added bonus, but now that limit has been ditched
Among the income tax cut, stamp duty cut and ditching of banker's bonuses, the Chancellor also announced:
READ MORE SUN STORIES
Read More on The Sun
- Beer price rise cancelled
- Boost for self employed as complex tax rules axed
- Low-tax investment zones for business
- Corporation tax hike scrapped
An earlier version of this article didn't make clear that those earning over £50,000 would also benefit from changes to the basic rate of income tax. It has been amended to clarify.