The PM’s tax plan and spending proposals
Boris Johnson made a series of spending promises both before and after becoming Prime Minister – including funds for Brexit, tax rate and threshold changes and more.
The plans could be fleshed out in either an Autumn Budget or emergency no-deal Brexit Budget should The Chancellor call one, in which case they will be scrutinised as part of the Treasury’s spending review.
Five key proposals
£2.1b no-deal funding
The government last week announced an extra £2.1bn of funding to prepare for a no-deal Brexit on October 31st.
The package will be spread across varying areas, including more border force officers and upgrades to transport infrastructure at ports. It is also designed to provide funds for stockpiling medicines to ensure continued supplies and a national programme to help businesses. In total, the Treasury has now made £6.3bn available since 2016.
A new immediate cash boost of £1.1bn will be made available to prepare for anything critical for an EU exit.
Raise the higher income tax rate from £50,000 to £80,000
Currently, individuals pay 40% income tax on earnings above £50,000. Under the PM’s proposal, the 40% higher rate would kick in at £80,000, the aim to reduce income tax. Those who already receive a generous work pension will be subject to less income tax up to the new threshold and unaffected by the national insurance rise.
Also, the PM wants to raise the National Insurance threshold to the personal allowance level, which could claw back some of the benefits meaning more income falls into the class 1 NICs 12% band. Although this has been debated before, as income tax and NICs are the biggest tax raisers for the government, The Chancellor may be forced in the next Budget to raise taxes in a different way in order to compensate.
Cut the rate of corporation tax
The PM has not been specific about the cut, although the corporation tax rate, which is the tax companies pay on their profits, has been cut from 28% in 2010 to the current rate of 19%. As confirmed in the 2018 Budget, this is due to fall to 17%, next year.
It was estimated the government that an extra one percentage point cut in corporation tax would cost £3.1bn in 2022-23. The question also is whether this would be applied to micro, small or medium sized companies.
Raising the Stamp Duty Land Tax threshold to property costing £500,000
This would mean all house sales under £500,000 would be exempt from stamp duty. The IFS (Institute for Fiscal Studies) said that stamp duty on housing transactions below £500,000 was £3.8bn in 2017-18, but it would expect the full cost to be slightly higher. This is due to some properties above £500,000 being lowered beneath the threshold to avoid the tax.
The proposal would also mean that, based on current levels, the average price on UK properties (all areas) would be immune from SDLT – including London’s average property price of £484,584 according to the most recent HM Land Registry data. It would also be a major reversal to the increases previously put in place by George Osborne.
Hospitals and social care
The PM plans to use ‘fiscal headroom’ to fund his programme for spending billions more on health and social care. This would include a hospital building programme and plan to ease the cost of care in old age.
As part of his first speech as PM, Johnson stated: “And so I am announcing now – on the steps of Downing Street – that we will fix the crisis in social care once and for all, and with a clear plan we have prepared to give every older person the dignity and security they deserve.”
Experts have said that to get back to the levels of access to help of 2009-10 would cost at least £8bn a year – and earlier this year analysis found that an extra £3.5bn a year would be needed to bring capital spending on the health service in England up to the OECD average.
How can accountants in practice best manage these communications?
If the Prime Minister did choose to fund any of his proposed tax changes, he’d likely have to raise taxes elsewhere, announce spending cuts or continue to fund it from government borrowing.
And for your clients, there can be a lot of changes that can affect their personal and business circumstance and finances, such as some of the PMs proposals around tax rates.
Updates like the above more can be at your clients’ fingertips 24/7 via your own branded App for your firm. You can set up groups for self-employed clients, business owners, small/start up clients and more, informing them regarding tax changes, Budget announcements, key deadlines, provide a checklist of useful information, and make sure they are equipped for their tax situation throughout the year.
It allows you to maintain personal communications and inform, advise and support clients.
- Create specific client groups
- Send out government tax proposal news and announcements
- Support clients with deadlines and set up a meeting
- Advise individuals, groups or all clients
- Link the notification to content you have produced on your website
Thousands of firms worldwide are already using this as part of their communication strategy, and certainly the most forward-thinking accountants all have something in common: they are engaging with clients on their smartphones and tablets digitally 24/7 and they get to live in their clients’ pockets and at the heart of their mobile lives.
To find out more about how your own App can benefit your practice and help revolutionise your client communications and engagement, book a free demo today.