We have a new government, whilst I accept the last government was mainly Conservative, the one is just Conservative, and that will make a difference. That said I would expect the tax and economic policies to be broadly continuous. We can, for example, expect the new lower 20% Corporation tax to be maintained.
George Osborne has been surprisingly radical with tax. He’s completely overhauled Capital Gains Tax, Stamp Duty Land Tax and Pensions, and significantly reduced Corporation tax. I would expect more change, in particular:
- The Tory manifesto talked about increasing the Inheritance tax limit for couples to £1,000,000. I would expect him to also have a look at the rate of tax. To my mind the tax free limit on Inheritance tax is quite generous, the problem with this tax is that at 40% it is so very high when it does kick in. I would expect him to re-think the whole Inheritance tax system. (so don’t die before he does his next budget!).
- He says he want to merge National Insurance and Income tax. Now that would be truly radical, it is very complicated to achieve, but who knows he might pull it off.
Merging these two taxes is a threat to small businesses, because they traditional pay themselves as dividends, avoiding national insurance. He might find a way of reducing what many might see as a tax loophole enjoyed by small businesses.
He says he will find £billions by shutting down tax avoidance. Of course one person’s avoidance is another person’s ‘right’. It strikes me that he needs a huge amount more money to be collected and he might do this by:
- Stopping tax savings small businesses rely on.
- Being more aggressive on the collection of tax and tightening the rules allowing taxpayers time to pay.
- And, yes, there is still some ‘dodgy’ avoidance going on.
I understand The Revenue are increasingly targeting accountants they suspect are overstating expenses and unlawfully reducing their client’s tax bills, and generally being aggressive. Of course the client picks up the bill. So be careful who you pick to advise you.
I have a guilty secret, I help people get tax credits, lawfully, but in a way I suspect was not intended when they invented the rules. Nothing too aggressive, however people have reasonable underlying profits or who are wealth can get tax credits, if we manage their income carefully. Now this does not make me proud, but I know my job is to look after my clients – not have a debate worthy of the ‘Moral Maze’! Tax Credits have helped millions of small business owners in their early years. I would be amazed if the rules are not tightened….significantly, the ease with which they are lawfully given does not feel right to me.
The Tories have promised to increase the threshold before you start paying income tax and higher rate income tax. I suspect that this will mean no reductions in the level of these taxes. The one to watch out for is an early reduction in the top rate of Income tax from 45% to 40%.
We wait with Interest!