To Leave or not to Leave? That is the question

By the time you read this you may well have the answer to this question! The EU agreed a deal, but at the time of writing, it seems Parliament is on a knife edge regarding voting for or against.

Sajid Javid had intended to deliver his first Budget on 6 November 2019, but, with a general election now looming, this has been delayed, probably into the new year. If he does get the opportunity to deliver his post-Brexit Budget, he will set out the plan to shape the economy for the future and trigger the start of our infrastructure revolution.

He added, “This is the right and responsible thing to do, we must get on with governing.”

The policies set out in the Queen’s speech included 22 policies to win over the electorate; no doubt a precursor to a general election. These include:

  • Seven policies relating to a law and order crackdown
  • A major series of reforms for the NHS
  • A bid to fight the social care crisis, predicted to be based around a new insurance system for older workers
  • Investment in education
  • Legally binding targets to enforce cleaner air and slash single use plastic

Having said all that, by now, all might have come crashing down. There is, after all, no Conservative majority, after suspensions and defections.

Indeed, if the Queen’s Speech is voted down, tradition dictates the PM resigns and calls a general election, which, at the end of the day, may be what Mr Johnson had been planning or wishing for all along. In that case, the proposals will no doubt form the basis for a Conservative manifesto.

Inevitably with a general election in the foreseeable, it might be worth considering what the major parties’ fiscal policies are. To quote the Shadow Chancellor, his tax strategy would be to deliver ‘an irreversible shift in wealth and power in favour of working people’, whereas the Chancellor’s intention is to deliver a Budget of ‘low tax and stimulation’.

Income tax rates

Conservative Labour
Zero tax – personal allowance £12,500 £12,500
20% tax to £80,000 £50,000
40% tax to £150,000 £80,000
45% tax Rest £123,000
50% tax on income more than £123,000
2.5% employer tax on earnings more than £300,000*
5% employer tax on earnings more than £500,000*

*Described as ‘an excessive pay levy’

National Insurance

The Conservatives have indicated an increase to the tax-free band and basic rate bands in line with the above. I don’t know what the Labour party intends.

Corporation tax

Labour would put up corporation tax to 26% and re-introduce a small company rate of 21% (currently 19%). Whilst we don’t know the Conservative plan, their intention over recent years has been to reduce the corporation tax rate.

Financial transactions and Stamp Duty

At present, Stamp Duty (SDLT) is 0.5% on most financial transactions. Labour proposes a new financial transactions tax to ‘radically enlarge the scope of UK Stamp Duty’. Conservatives haven’t commented, although their view is to increase the SDLT threshold to £500,000 from the current £125,000 and not change the current rates.

Council tax

Labour party: propose a radical increase to the tax on property to replace Council tax. Conservative party: no comment yet, but maybe they’ll make no great change?

Inheritance tax

The Office of Tax Simplification has suggested some basic tidying up, which the Conservatives are considering. Labour, however, want to abolish inheritance tax in favour of a lifetime gift tax, with gifts above a lifetime rate of £125,000 being taxed at the recipient’s highest rates (up to 50%!).

It’ll be interesting to see how all this pans out over the next few weeks, and hopefully, by the time I write for next month, the fiscal future will be a bit clearer.

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