Rishi Sunak: what is Tory leadership candidate’s plans to cut income tax, what did he say, will it impact me?

Rishi Sunak has committed to slashing 4p off income tax within seven years if he becomes Prime Minister.

The pledge marks a last-ditch attempt to win over Tory members before they start receiving their ballots this week.

The Conservative leadership candidate’s campaign said cutting the basic rate from 20p in the pound to 16p would amount to a 20% tax reduction, making it the “largest cut to income tax in thirty years”, and would mean millions of households would pay a fifth less in income tax.

However, supporters of his rival Liz Truss called branded the move as “flip flops and U-turns” on tax after he criticised his rivals for promising major tax cuts.

The former Chancellor suggested Ms Truss was being “dishonest” with voters with promises of sweeping tax cuts and engaging in an “act of self-sabotage that condemns our party to defeat” at the next general election.

Why has Rishi Sunak pledged to cut the basic rate of income tax?

Mr Sunak said the policy is part of his “radical” tax vision and it builds on his previously-announced 1p cut to income tax in April 202. He argues the move is consistent with his previous stances.

The deadline for taking off the additional 3p – the end of the next Parliament – could be as late as December 2029.

Tax has dominated the bitter race for No 10, in which the former Chancellor has repeatedly called Ms Truss’s tax-cutting plans “comforting fairy tales”.

But Ms Truss’s proposals appear to have convinced many of the party faithful who will elect the next leader – with polls suggesting she has a clear lead over Mr Sunak – and a growing number of senior Tory MPs, with Tom Tugendhat saying her proposed cuts were based on “true Conservative principles”.

What has Rishi Sunak said?

Announcing his new personal tax policy, Mr Sunak emphasised the need to control inflation before reducing taxes and suggested his rival’s plans would fuel inflation.

He said: “What I’m putting to people today is a vision to deliver the biggest income tax cut since Margaret Thatcher’s government.

“It is a radical vision but it is also a realistic one and there are some core principles that I’m simply not prepared to compromise on, whatever the prize.

“Firstly I will never get taxes down in a way that just puts inflation up. Secondly I will never make promises I can’t pay for. And thirdly I will always be honest about the challenges we face.

“Because winning this leadership contest without levelling with people about what lies ahead would not only be dishonest, it would be an act of self-sabotage that condemns our party to defeat at the next general election and consigns us to a long period in opposition”.

According to Mr Sunak’s campaign, the 1p income tax cut he announced at the Spring Statement is fully costed and paid for.

Each subsequent penny off, which would cost about £6 billion a year, would be funded through tax receipts generated by forecast economic growth and would not see the debt burden rise.

Sunak’s U-turn on tax last week - when he promised to temporarily slash VAT on energy bills - has seemingly failed to give him any significant boost in polling of Tory members since.

How has Liz Truss’ campaign responded? 

Chief Secretary to the Treasury Simon Clarke, who is backing Ms Truss, said: “We cannot afford to wait to help families, they need support now. Liz will cut taxes in seven weeks, not seven years.”

A Truss campaign source added: “It’s welcome that Rishi has performed another U-turn on cutting tax, it’s only a shame he didn’t do this as Chancellor when he repeatedly raised taxes.

“He has also made it conditional on getting growth first – knowing full well that his corporation tax rises are contractionary.

“The public and Conservative Party members can see through these flip flops and U-turns.”

When will Tory members vote on Boris Johnson’s successor?

Postal ballots for the new Conservative Party Leader and Prime Minister will begin being sent out on Monday, giving Tory members the chance to vote before the result is announced on 5 September.

The campaign battle is dominated by Mr Sunak and Ms Truss, who have taken part in head-to-head debates - most notably regarding their differing stances on tax. However, in the opinion polls, Ms Truss is taking preference to be the UK’s next prime minister.