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UK’s Johnson raises prospect of 10 billion pound payroll tax cut

November 20, 2019 at 5:12pm
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British Prime Minister Boris Johnson raised the prospect of a multi-billion-pound cut to a payroll tax, saying he would raise the amount of earnings exempt from social security payments if he wins an election on Dec. 12.

Workers currently pay National Insurance contributions (NICs) on annual earnings over 8,632 pounds ($11,147), lower than the 12,000-pound threshold at which income tax becomes payable.

Earlier this year, Johnson said he wanted to bring the National Insurance threshold in line with income tax. On Wednesday he said that would be a key goal if his Conservative Party forms Britain’s next government.

“We’re going to be cutting National Insurance up to 12,000,” Johnson said in reply to a question at a campaign event in northeast England about how he would help average earners.

If fully implemented, the tax cut would give an extra 404 pounds a year to workers earning over 12,000 pounds annually.

In September, the Institute for Fiscal Studies, an independent think-tank, said each 1,000 pound increase in the NICs threshold would cost 3 billion pounds, potentially giving the policy a 10 billion pound price tag.

Johnson did not say when the change would take effect. Previous increases in the starting threshold for income tax were spread out over several years.

The IFS said reducing workers’ NICs contributions was not the best way to help low-paid employees as most of the benefit from the increased threshold went to the better paid.

The Conservative Party has not yet formally released its full policy plans for the election.

Johnson called the election in order to break a deadlock over Brexit in parliament.

Finance minister Sajid Javid – who has announced big public spending increases – has said income tax cuts are unlikely.

Johnson said during the Conservative Party leadership race in July that he wanted to raise the threshold at which the 40% higher rate of income tax is paid to 80,000 pounds from 50,000 pounds.

(Reuters)