Election 2019 tax proposals
Dec 06, 2019
So amongst all the pre-Christmas build-up, this year we have the added excitement of a General Election. And as to be expected, the various political parties are all in the throes of making bold promises in the run up to polling day on 12 December.
Many of these promises include how they’d increase spending if elected, particularly in providing extra money for the NHS. Although many of these spending pledges will be funded out of increased borrowing, the parties have assumed that they can persuade voters that extra spending on the NHS should come from general taxation.
The Liberal Democrats’ policy would be to increase the rate of Income Tax by 1%, in order to raise £35 billion a year for the NHS and social care. The Conservative and Labour parties both propose to provide extra money for the NHS funded from Corporation Tax changes.
Corporation Tax (CT) is scheduled to be reduced from 19% to 17% from 1 April 2020.
However, in a speech to the CBI on 18 November Boris Johnson announced that, if elected, the Conservative Party would keep the rate at 19% to provide an extra £6 billion for the NHS.
Despite Jeremy Corbyn telling the CBI that the Labour party is ‘not anti-business’, the party has previously announced that they would reverse the recent cuts in CT. It’s worth noting that at the end of the last Labour government back in 2010, the rate of CT was 28%.
Both the Conservative and Labour party are making noises about abolishing Entrepreneur’s Relief (ER) after this election. The Tory manifesto declares there will be a full review of the tax measure which has apparently ‘not fully delivered on [its] objectives’. HMRC has previously indicated that ER is too generous to investors, so there is every likelihood that this tax relief may be scrapped altogether rather than reformed.
Labour has confirmed that they would abolish ER, and instead they promise to focus on, ‘a better form of support for entrepreneurs which is not largely just a handout for a small number of people’, according to their tax policy proposal.
There’s no comment from the Liberal Democrats specifically focused on ER.
Off-payroll working in the private sector
As well as scrapping ER, Labour has declared its intentions to abandon all of the current government’s plans to extend the IR35 off-payroll tax rules to the private sector in April 2020.
The Liberal Democrats meanwhile have declared that they would take on a review of the proposals.
In every General Election since 1997 there have been pledges by the various political parties to resolve the funding of care for the elderly in the UK and yet nothing has happened. It even sparked a dramatic U-Turn by Teresa May in 2015 with her proposal for a so-called ‘dementia tax’. With the care system in crisis any solution will be very expensive, and the question will be whether any costings stand up to scrutiny.
Although not strictly a tax matter, paying for care fees for elderly relatives is a bigger issue than Inheritance Tax (IHT) for many families. The current rules in England and Wales require family members to make a contribution to care fees where the elderly person’s assets exceed £23,250, which can include the value of the family home.
The normal IHT planning strategy of giving wealth away and surviving for seven years does not necessarily work, as the social care rules are based on the concept of ‘deliberate deprival’ of the estate. If the local authority considers that the transfer of assets was done deliberately to deprive the estate of assets in order to avoid paying care fees, then the transfer is ineffective.
If you’d like to discuss how you may be affected by upcoming tax changes after the election, please give us a call and we’ll be happy to have a chat.