For the past few weeks, Mr & Mrs Cameron have been busy unpacking their boxes, they do not have to move house after all. We now look forward to the next five years under the Conservatives ruling the country outright.
But what can we expect in this period, tax wise? In general, the party aims to eliminate the £90 billion deficit in current spending by 2017-18 and achieve a Budget surplus from 2018-19.
Let’s look at some of the main points of the Conservatives’ election manifesto:
The individual personal allowance to increase to £12,500 during the course of the parliament. The personal allowance for this tax year 2015-16 is £10,600. The increase is expected to be linked to the National Minimum Wage so that a worker on the minimum wage working 30 hours per week will pay no tax.
The threshold for the 40% higher rate income tax band is raised to £50,000. The threshold for this tax year is £42,385. According to their estimate, this will take around 800,000 people out of 40% tax band.
For a person earning £50,000 per annum in this tax year, the total net pay is £36,326 after tax and NIC. Once the personal allowance is increased to £12,500 the same person will receive a net pay of £38,229. The increase is expected to cost the Treasury £5.6 billion a year.
At the same time, to encourage people to work, the benefit cap will be lowered from £26,000 to £23,000. Working parents with three and four-year-old children can benefit from 30 hours free childcare per week, currently 15 hours per week.
The Conservatives also promise that there will be no increase in income tax, VAT and National Insurance contributions.
Mr Cameron has also promised to increase the Inheritance Tax threshold to £1 million for married couple and civil partners.
Currently, the first £325,000 of the value of an Estate is tax free and can be passed to from one spouse to another, making a total tax free allowance of £650,000. From April 2017, each parent can also benefit from £175,000 nil-rate band in respect of their main residence, therefore parents can pass on their property up to the value of £1 million to their children Inhertiance Tax free.
The above scheme is expected to cost the Treasury £1 billion and this is expected to be funded by reducing the tax relief on pension contributions for people earning £150,000 or more. Also, from 6 April 2016, the lifetime allowance on pension contributions will be reduced to £1 million from £1.25 million.
In order to help people with a deposit to buy their first home, from autumn 2015, the Government will introduce a new Help To Buy ISA. Under the scheme, the Government will add 25% on top of your savings up to a maximum of £3,000. This is equivalent to letting you save for your house deposit from a pre-tax income, as the 25% top up is equal to the tax that a basic-rate tax payer would pay. Some people speculate that parents will open a Help To Buy ISA for their children (aged 16 years and older) to increase the deposit that they gift to them by a maximum of £3k a year.
In respect of corporation tax, there is no change proposed as the rate of corporation tax has been reduced to a flat rate of 20% in the last 2010-2015 Parliament. Smaller business that take on new workers will benefit from a £2,000 per annum allowance on their employers’ NIC through the Employment Allowance.
In order to help fund the above incentives, the Government pledges to work harder on tackling tax evasion and aggressive tax avoidance, hoping to raise at least £5 billion. Also, there will be an increase on the annual tax charges paid by Non-Doms.
We will be presenting our post-election Summer Budget Seminar next week on Thursday 9 July at the Aquatics Centre, Queen Elizabeth Olympic Park, Stratford. Please contact Rhea Fegan on 020 8988 6100 or at firstname.lastname@example.org for further details or to book your place.Talk to Barnes Roffe today