What does a Conservative Government mean for Tax in 2020?
The Conservatives remain in government with a majority big enough to easily get through most legislation they wish, so what does that mean for tax policy for the next five years?
There’s not too much detail in their pre-election promises (or threats), but notably Boris Johnson has guaranteed that “we will not raise the rate of income tax, VAT or National Insurance”
That’s a strong statement on the face of it, but adding a percentage point onto any of those taxes isn’t the only way to raise tax on those. Clip the thresholds rather than raise the rate, or remove or restrict a relief for a niche group or product, for instance are ways of sticking to that promise. There are plenty of things that can be done around the margins to raise those taxes via smoke and mirrors.
For National Insurance
For national insurance they have indicated a cut for workers by raising the threshold at which NI is paid. The threshold for paying NI is currently earnings above £8,632, and they have declared the ambition to raise that to £12,500 to match the personal allowance tax threshold. That might also mean that the Tories don’t plan to raise the personal tax allowance over the next five years either. My assumption is that such a cut in NI would also extend to raising the self-employed NI threshold by the same margin.
What about Corporation Tax?
For Corporation Tax – not on that promissory list – the Conservatives have said that the two percent reduction in the rate that companies would pay from April 2020 will now be rescinded, and it will stay at 19%.
And for business owners?
Business owners thinking of selling up should be wary of the signal that the government will review Entrepreneurs’ Relief, the capital gains tax relief that can bring down the rate of tax to just 10% for owners selling their business. The Treasury has already been commenting that the relief (now in its eleventh year) is costing more than expected.
We’ll know more soon – expect a Budget in February, straight after Brexit.
Garbutt + Elliott has a team of tax specialists who are willing to help. As always, in the world of tax, the rules are complex and this blog provides only a broad overview, for more information contact Rob Durrant-Walker at firstname.lastname@example.org for any assistance on these matters.