So the polling booths have closed, the votes have been counted, the swing-o-meter has been put away for another five years, and we now have a new government. All of the parties made many promises made before the election, including the Conservatives, so now let us all hope that those promises are kept. Let us have a look at some of the main ones affecting taxation, which can be located on and after page 27 of the Conservative manifesto.
Firstly, we have been promised that there will be a “five year lock” on income tax, VAT and national insurance. This is a promise that during the period from May 2015 to May 2020 there would be:
– no increases in income tax rates,
– no increases in VAT, nor to its scope, and
– no increases in National Insurance nor to its ceiling.
More specifically, we have been promised that:
– Nobody working 30 hours on minimum wage will ever pay income tax
– The tax-free personal allowance will rise to £12,500 by 2020
– The 40p tax threshold will increase to £50,000 by 2020 and will always rise at least in line with inflation
It certainly seems strange that whilst the government has for many years considered it to be a legal requirement that employers are required to pay a minimum hourly wage they have never in the past been slow in taking some of that minimum wage in tax and national insurance.
Secondly, we have also been promised that the family home will be taken out of Inheritance Tax by increasing the threshold for married couples to £1m. This will be achieved through a new transferable main residence allowance of £175,000 per person. The manifesto says that this will be paid for by reducing the tax relief on pension contributions for people earning more than £150,000, most probably by reducing the maximum contributions on which relief is given, currently £40,000 each year, by £1 for every additional £2 of income above £150,000 to an allowance of £10,000 a year, effectively giving a marginal income tax rate of 67.5% between £150,000 and £210,000 for those
making contributions.
WatkinsonBlack are pleased to advise on these as well as other matters, including providing a very cost-effective payroll bureau service. If you want to arrange a no-obligation initial meeting on any taxation or accounting matter then please contact us.
Please note that these ideas are intended to inform rather than advise and you should always obtain professional advice before taking any action.