With just a month to go until the UK General Election, it is a good time to consider the different tax policies of the main political parties in order to have an idea of what potential changes could be round the corner come December 12th. Currently ahead in the polls is the Conservative Party and it is expected that a government headed by Boris Johnson will raise the higher income tax band cut-in from £50,000 of gross income to £80,000. They will also raise the upper earnings /profits limit of National Insurance to £80,000. The Conservatives will continue their cut of corporation tax rates, which were 27% in 2010 when they came into power and will end up reduced to 17%.
On the other hand, the Labour party would change the income tax bands and bring in a new 45% rate so that the income tax rates would be 20% for £0 to £50,000, £50,001 to £80,000 at 40%, £80,001 to £125,000 at 45% and £125,001 upward at 50%. They would also implement a similar change to dividend taxes, with an additional band slotting in above the upper rate. The rates would therefore be ordinary 7.5%, upper 32.5%, upper higher 38.1% and a top rate of 43.1%. As a further contrast to the Conservatives, they will re-introduce the lower rate band for corporation tax for small company profits, whilst bringing in a huge increase to the main corporation tax rate from 19% to 26%. Labour have also stated they will scrap all making tax digital quarterly reporting requirements for firms with turnover below £85,000 and create a financial transactions tax for City firms.
If the Liberal Democrats were to come into power they plan to raise income tax in every band by one percent and do the same for dividend taxes. They also aim to equalise the thresholds for income tax and national insurance, so that the primary threshold for NICs and the tax free allowance for income tax would be at parity, without losing access to pensions or benefits. They will also increase corporation tax to 20% and reform the capital gains and dividend tax reliefs. Finally, the party have stated they want to create a ‘start up allowance’ to help new business owners with living costs during the start up of a business, whilst reviewing small firms business rates.
As is evident, there is much uncertainty in UK politics at the moment (without even mentioning Brexit) but the above gives us an indication of the potential tax implications should each of the main political parties be successful. After the general election and as the picture becomes clearer, FKGB Accounting are here to assist with taxation advice so please contact us as needed.
