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Potential Tax Changes Under The Next Tory PM

View profile for Marc Dorsett
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Potential Tax Changes Under The Next Tory PM

Unless you've been living in a cockerel's boot for the past few months, you'll be aware of the ongoing race to be the new Prime Minister.

Now we have just two MP's on the shortlist, Messrs Johnson and Hunt. The choice for who tries to take us out of Europe and shapes the Country for the foreseeable future will be determined by around 160,000 Tory party members - that's roughly 0.34% of the voting population deciding on the direction the whole country takes…

Whether Johnson is better than Hunt is not for me to say, publicly anyway, but each do have their own interesting take on what changes they would make to the tax system. Below I look at each candidate's proposals.

Hunt

Mr Hunt, being careful not to make the same mistake as Victoria Derbyshire, wants to cut Corporation Tax to 12.5% - currently it is 19% reducing to 17% from April 2020. The Institute for Fiscal Studies (IFS) reckon this will cost the UK around £13bn a year in the short term

He would also aim to raise the threshold for paying National Insurance to £12,500. Currently the amount an individual can earn before paying National Insurance is £8,632 so the increase is roughly 50%. The IFS have calculated that this increase would cost £11bn a year although it could save taxpayers around £460 a year.

Income tax has not been mentioned specifically but the IFS has stated that Mr Hunt's plans overall would cost between £37-65bn. This includes the cost of increasing defence spending and cutting interest rates on student loans.

Johnson

Mr Johnson has been a bit more vocal on his income tax plans. He proposes to increase the 40% tax threshold from £50,000 to £80,000. This could save a person with income exceeding £80,000 around £6,000 in tax a year. Clearly Mr Johnson knows his target audience…

To help pay for this reduction in tax take Mr Johnson wants to increase National Insurance Contributions payable. The impact of this change and the increase in the higher rate threshold will be of particular benefit to taxpayers who derive their income from investment sources, such as rental portfolios or share portfolios as National Insurance is only paid on earnings. The IFS think that the income tax and National Insurance changes will cost around £9bn and benefit only the top 10% of earners.

A further boon to landlords could also be in the form of changes to the SDLT regime that Mr Johnson wants to bring in. He would like to abolish SDLT for properties costing less than £500,000 and reduce the SDLT payable by high end properties. Without a firmer idea of details it is difficult to calculate what the cost to the UK would be but it is clear that the housing market would get a boost, particularly the very expensive high end properties.

Despite all the pledges we won't really know what will happen until they become Prime Minister. Then we have Brexit to contend with, if it happens, and it seems more likely each week that a General Election will happen at some point so how long Hunt/Johnson will be in Number 10 is anybody's guess, especially with the balance of the 45m voting population having a say…

Whilst we don't know what will happen to the tax system, we do know what the rules are now and Gepp Solicitors are able to assist with any tax planning needs. If you have any questions or wish to discuss your tax affairs please contact Marc Dorsett on 01245 228146 or dorsettm@gepp.co.uk.

This is not legal advice; it is intended to provide information of general interest about current legal issues.