Advice on amending tax cuts to deliver broader cost-of-living relief

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Date: 25 January 2024

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This advice paper recommends a redesign of the legislated tax cuts to better provide cost‑of‑living relief to all taxpayers.

Treasury has examined the distributional impacts of rising cost‑of‑living pressures and estimates the effects of the Government’s tax cuts on individuals’ tax liabilities across the income distribution, bracket creep, and labour supply.

It finds that while cost‑of‑living pressures have been broad based, the ability to deal with these pressures is unevenly distributed. Low- and middle‑income households have less capacity to absorb rising prices because they have less scope to draw down on savings and they spend more of their money on essential items.

In estimating the effects of the Government’s tax cuts, Treasury concludes that the redesign will provide tax relief for all taxpayers without adding to inflationary pressures. The tax cuts will also provide relief from bracket creep for all taxpayers and will raise labour supply – particularly of women.