Britons hoping to see their tax bills go down after the Spring Budget could be disappointed.
Chancellor Jeremy Hunt has told a Cabinet meeting there is less capacity for slashing taxes than previously hoped.
As reported in The Times, he told his fellow ministers: “We are not likely to have as much room for tax cuts as we had in the autumn.”
He said the economy faces key “structural weaknesses” that mean big tax cuts may not be feasible. There were previous reports he could cut income tax or National Insurance in the March 6 Budget.
The news comes after the International Monetary Fund advised the UK against further tax cuts, after the group downgraded its predictions for UK growth for 2024, from two percent to 1.6 percent.
Mr Hunt announced a cut in the main rate of employee National Insurance in the Autumn Statement, from 12 percent to 10 percent, which came into effect from January 6.
But after two years of rapidly rising energy bills and other living costs, many Britons have seen a large real terms cut in their income.
In contrast, one tax bill that will likely increase by a signficant amount this year for many Britons is council tax, with many authorities already publishing plans to raise levies by the maximum five percent.
There have been reports some struggling councils could increase bills by 10 percent, including Birmingham and Nottingham, which both issued a Section 114 notice last year, effectively declaring bankruptcy.
Another concern is frozen tax allowances are meaning Britons are being dragged into paying more tax as wages and other sources of income increase.
State pensioners could soon be paying income tax on their payments as the full new state pension, at £203.85 a week, is near the threshold for paying the levy. The personal allowance for income tax is currently £12,570 a year.
A petition calling for the state pension to be made tax free had more than 32,000 signatures. The Government said in response: “Removing income tax from the state pension would add complexity to the tax system and those paying higher rates of tax would receive the greatest benefit.
“Lower-earning individuals with income below the higher rate threshold would benefit less and those earning below the personal allowance would not benefit at all.”
Officials also clarified the current rules that generally “benefits that are designed to replace income are taxable and the same applies to income from the state pension”.
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