Families to get help with care costs as Liz Truss weighs major tax cuts

Parents who step back from work to take care of elderly loved ones or children will get a new tax break under a change expected to be unveiled by Liz Truss before Christmas.

The move is just one of half-a-dozen major tax cuts the Prime Minister is weighing up to kick-start the economy and avoid the recession that is forecast for the coming year.

Ms Truss and Chancellor Kwasi Kwarteng are plotting two major fiscal interventions in three months as they make economic growth the number-one target of the Treasury.

One raft of tax cuts is expected to be announced on Friday as government policy-making returns after a period of limited activity during the mourning period for Queen Elizabeth II.

At least three tax cuts

At least three tax cuts will be confirmed at that event. One will be the reversal of the 1.25 per cent National Insurance hike that came in this spring.

A second is scrapping plans for Corporation Tax to jump from 19 per cent to 25 per cent next spring. The third is temporarily suspending green levies on energy bills, which was confirmed last week.

Beyond those measures, however, are a string of other tax cuts that are being considered that could have a significant direct impact on household finances.

Some are being considered for Friday’s announcements. Others are more likely to wait until Ms Truss’s first full Budget, which is expected to take place in November.

One of those moves involves a tax cut for families. When Ms Truss launched her Tory leadership campaign in July she promised a review in this area.

Tax cut for families

Ms Truss said in her launch speech: “Families are a vital part of our lives and a crucial building block for a stable society.

“They don’t just look after themselves, but they’re part of communities, charities and even businesses.

“We will review the taxation of families to ensure that people aren’t penalised for taking time out to care for children or elderly relatives.”

Later in the campaign a specific policy change was pledged – allowing people to transfer their personal tax allowance within a household.

Each adult is currently allowed to earn £12,570 a year before paying any income tax. However, if that person steps back from work to look after someone then the tax benefit is lost.

Under Ms Truss’s proposals, the tax allowance could be passed over to a partner in such circumstances, meaning an effective tax saving of up to £2,514 a year per couple.

Ms Truss’s decision to put the issue in her first campaign speech and later to spell out a specific policy means swift action is expected now she is in Downing Street.

A government source last night indicated that the change is more likely to be announced in the Budget later this year than this Friday’s fiscal statement.

A fifth major tax cut being considered is bringing forward the 1p cut to the basic rate of income tax, which is scheduled to come into effect by 2024.

Speeding up income tax cut

There was no denial yesterday of press reports that speeding up the income tax cut was being considered for this Friday’s announcements, although no final decision has been taken.

In recent weeks it was widely reported that another tax cut is being weighed up – reducing VAT. The move is only possible now the UK is out of the European Union.

There has also been speculation that the Treasury could consider another fuel duty cut, given the soaring cost of petrol in the last year.

However, there has been a debate among policy specialists about whether the 5p fuel duty cut announced in March was really passed on to drivers.

The range of tax cuts being considered shows the degree to which Ms Truss is preparing to stick to her campaign promise of lowering the tax burden.

However the cost – already expected to be more than £30 billion a year for just the National Insurance, Corporation Tax and green levy changes – would be even steeper with further cuts.

The Labour Party is sure to double down on its criticism earlier this month of the energy intervention, where the Government decided to borrow to cover the costs, rather than raising more money from a windfall tax on oil and gas companies.

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