Tax cuts in Prime Minister Truss's Growth Plan 2022

See the impact on the population and on your household in PolicyEngine UK.

UK Chancellor of the Exchequer Kwasi Kwarteng

Earlier today, UK Chancellor Kwasi Kwarteng announced the Growth Plan 2022. The plan includes several provisions affecting National Insurance, Income Tax, and Stamp Duty:

• “reducing NICs rates by 1.25 percentage points from November and cancelling the Health and Social Care Levy coming in from April 2023.” (section 3.20)

• “bring forward the 1 percentage point cut to the basic rate of income tax to April 2023” (3.21)

• “the additional rate of income tax will also be removed from April 2023” (3.22)

• “reverse the 1.25 percentage point increase in dividend tax rates from April 2023” (3.23)

• “From 23 September 2022, the government will increase the threshold above which Stamp Duty Land Tax (SDLT) must be paid on the purchase of residential properties in England and Northern Ireland from £125,000 to £250,000.” (3.29)

• “From 23 September 2022, the threshold at which first-time buyers begin to pay residential SDLT will increase from £300,000 to £425,000 and the maximum value of a property on which first-time buyers relief can be claimed will also increase from £500,000 to £625,000.” (3.30)

As we wrote yesterday, PolicyEngine fuses property values across government surveys to provide the UK’s only publicly available model of stamp duties. Our unified, enhanced dataset and model allows us to score the Growth Plan’s Stamp Duty reforms alongside the Income Tax and National Insurance reforms, which we did within minutes of its announcement on Twitter.

You can see the population impact of the package here and compute the impact on your own household here. We’ve provided top-level results below.

Our static microsimulation model finds that the package, assuming all provisions occurred over the 2022 calendar year, would:

• Cost £16.2 billion

• Benefit 80% of the population, disproportionately those in higher income and wealth deciles

• Reduce poverty by 1.4%, disproportionately among seniors (1.9%)

• Increase income inequality: the policy increases the Gini index by 1.2%, the top 10%’s income share by 1.0%, and the top 1%’s income share by 2.2%

The policy has a larger net income benefit to those in higher income, both in relative and absolute terms. For example, it raises the top income decile’s net income by an average of £2,738 (2.5%) and that of the bottom decile by £45 (0.4%). The policy similarly benefits high wealth deciles more than low wealth deciles, though to a lesser degree.

**Explore more population-level charts in PolicyEngine here.**

The benefit of the reform increases with income for individual households, as well as in aggregate. For example, a single person with £50,000 employment income will gain £842, while a single person with £200,000 income will gain £5,220.

Their marginal tax rate falls by:

• 2.2p for income between £12,570 and £50,270

• 1.2p for income between £50,270 and £150,000

• 6.2p for income above £150,000

The policy affects a family of four (married, two children) differently due to the interaction between Income Tax and Universal Credit.

Their marginal tax rate falls less in the Universal Credit taper zone, by about 1.0p.

**Compute how the reform would affect your own household here.**

As always, you can also experiment with a custom reform alongside Growth Plan 2022. If you’d prefer an alternative reform, how would you design it? Compute the impact in PolicyEngine and let us know!

Labour Income Tax reforms under the Growth Plan 2022

max ghenis
PolicyEngine's Co-founder and CEO

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