Grads unfairly treated in mini-budget?

27 Sep 2022

The UK government’s mini-budget announced last week disproportionately favours older, higher earners, according to financial experts, leaving young people missing out. Chancellor Kwasi Kwarteng unveiled the largest tax cuts in half a century, scrapping the top 45% rate of income tax, National Insurance increase and slashing stamp duty for home buyers. “It will reward enterprise and work. It will incentivise growth. It will benefit the whole economy and whole country,” the Chancellor said. However, a number of experts said there was little advantage for young people. According to Sarah Coles, personal finance analyst at Hargreaves Lansdown: “The people who missed out in this Budget are those on lower earnings. We do know that at the start of their careers, young people earn less. So to that extent, young people have missed out because there are far more tax savings here for higher earners.”

Grads missing out
After the announcement of the mini-budget, claims arose suggesting a graduate earning £50,000 will pay a “higher” marginal rate - 51% - than someone earning £150,000 - 42% - and yet a graduate earning £25,000 would pay 40% in a marginal rate. This is only two points less than top earners. Coles added that if student loan repayments were considered, it should be viewed as different from tax. “They both come out of your salary before you can spend it, and they are both big drains on graduate incomes, so they feel similar,” she said. “In the same way you wouldn’t add a mortgage to your tax bill when working out your tax burden, it’s not strictly right to add any other kind of loan repayments.” Moreover, tax expert at Quilter, Shaun Moore said grads earning more than the current £27,295 threshold will have a marginal tax rate of 40% as from next April. This follows on from the government’s plans to cut the student loan repayment threshold to £25,000, for those starting their courses next September. “Many young graduates will see this as daylight robbery,” Moore said. “Ultimately, they have done the right thing by working hard to gain a degree in order to accelerate their career, yet they are to be slapped with a huge level of tax as a result.”