September 5th 2022 3:43 pm

Written by Robert Perkins

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Prime Minister Liz Truss's Cost of Living Support

New PM Liz Truss wins leadership by 20,000 votes - what can she do to help the nation's finances?

During the leadership challenge, amongst the many promises made, Truss stated she would immediate reverse the national insurance rise implemented by challenger Rishi Sunak.

Now, with Sunak having lost the race as well as his position as chancellor - and current chancellor Nadhim Zahawi likely to be replaced by Kwasi Kwarteng - will Truss follow through and reverse the NIC changes in an emergency September Budget? Well, the Autumn Budget could indeed be brought forward.

The nation is still suffering anxiety at already rising energy bills with the coming energy price cap rise in October, and with multiple further rises as shown in our energy price cap calculator, will Liz Truss's plans be enough?

We put together a Liz Truss Tax Calculator during the leadership race based on her NIC reversal plans and her intention to allow partnerships/married couples to transfer unused personal tax allowances to each other.

The NIC reversal, if implemented with just the 1.25 percent surcharge being removed but the increased thresholds retained, would not really amount to much when inflation is running at over 10 percent (projected to hit 22 percent next year).

A person earning £25,000 would be £13 a month better with just the NIC reversal.

A married/partnership couple however, if one partner has a fully unused personal tax allowance would see the working partner earning £25,000 £200 a month better. This is because Truss's plan is to allow up to 100 percent of the allowance to be transferable, rather than up to just 10 percent currently.

With the changes, a couple in the same scenario, but with the working partner earning £45,000, would see an extra £222 a month after taxes.

This doesn't however address single people who still have energy bill concerns as well as knock-on inflationary pressures - and of course businesses who don't have a price cap and have seen massive cost hikes, which then trickle down the economy.

Truss has stated an energy bill plan is to be revealed by next Monday. There is already a £37 billion cost of living plan announced by the previous administration, with up to £1,200 off bills for the most vulnerable but at least £400 off bills for everyone.

There is a lot of speculation that Truss could implement a price cap freeze - possibly limited to domestic raw suppliers - in an effort to bring down bid costs in the energy marketplace. This could cost another £30-40 billion. It is a plan previously put forward by the Labour Party.

Other proposals including further cuts to business rates, a VAT slash across the board to 15 percent, freezing fuel duty cuts. Businesses could see the plan to increase corporation taxes to 25 percent scrapped and corp tax kept at the current 19 percent.

More radical tax proposal include lowering the basic rate of tax from 20 percent (maybe to Sunak's 19 percent?) and increasing the higher rate threshold at which people start paying tax on earnings at 40 percent (Zahawi's plan?).

We will all find out soon enough as Truss takes PM's questions tomorrow and let's see if she sticks to her promise to reveal energy interventions by next Monday. The speculation above could cost over £100 billion in total and this would be added to the UK's £2.4 trillion debt - something Rishi Sunak was hesitant to add to.

The Conservative Party members have has there say. As for the wider UK - the hashtag ThickLizzy is currently trending on Twitter.

See more articles from September 2022

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