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Conservative manifesto and tax plans – Boris Johnson pledged an extra 50,000 NHS nurses, thousands of doctors and primary care staff and to restore a nurse bursary in his manifesto launch. Central to Mr Johnson’s manifesto was his commitment to “get Brexit done” in order to move the country forward. The PM pledged not to raise the rates of income tax, national insurance or VAT – a “triple tax lock” – and promised a £10bn plan to raise the national insurance contributions threshold for working people. Mr Johnson acknowledged that the Tories were “not prioritising tax cuts for high earners at the moment” and the manifesto did not include a previous promise to cut stamp duty. The Conservative Party’s manifesto also pledges to increase the R&D tax credit rate from 12% to 13% and initiate “the fastest-ever increase in domestic public R&D spending, including in basic science research”. A review of the definition of R&D to include investment in areas such as data gathering and processing, and cloud computing would also be undertaken. Business leaders welcomed the “pro-enterprise” manifesto but some were left in doubt that it alone would be sufficient to turbocharge Britain’s economy. Other policies include scrapping parking charges at NHS hospitals for patients, relatives and staff; spending billions on making homes energy efficient; a ban on the export of plastic waste to developing countries; a review of CGT relief for entrepreneurs. In an interview with the Mail on Sunday, Mr Johnson says his pledges are all fully costed and sound and that tax cuts will be paid for by “turbo-charging the economy”. The PM argues that Jeremy Corbyn’s planned £400bn spending splurge and tax rises targeted at the rich would take “a total sledgehammer to the economy”. The Tories are regarded in the press to have played it safe with this manifesto, with day-to-day spending increases 28 times lower than Labour’s. (Source: Sunday Times, 24/11/19 and Financial Times, 25/11/19)
…while PM postpones corporation tax cut – The Prime Minister has announced that planned cuts to corporation tax are to be put on hold. The rate paid by firms on their profits was due to fall from 19% to 17% next April but Boris Johnson said the potential £6bn cost would be better served going on “national priorities” such as the NHS. Mr Johnson told the Confederation of British Industry (CBI) conference that the UK already had the lowest rate of corporation tax of “any major economy”, highlighting that corporation tax had already fallen from 28p to 19p in the pound since 2010, adding that further cuts would be “postponed”. He added that the move comes as the Conservatives “believe emphatically in fiscal prudence”. Mr Johnson also said the Tories plan to lower business rates, saying a reduction – “particularly for SMEs” – will boost the high street. He also said employers’ national insurance contributions – which he described as a “jobs tax” – will come down. (Source: The Times, 19/11/19)
…and plans to cut NI and rethink income tax for workers – Boris Johnson says the Conservatives aim to change the National Insurance threshold so people do not pay it until they earn £12,500. The Prime Minister said it would be raised from the current £8,628 to £9,500 in the party’s first budget, with plans to increase it by a further £3,000 in the future. This would, he says, ensure “low tax for working people”. The Institute for Fiscal Studies has said an increase to £9,500 in 2020/21 would mean a £85 boost for workers, while an increase to £12,500 could save workers up to £465 a year. Details of the tax plans were revealed by the PM during a Q&A at an engineering plant in Middlesbrough, with Mr Johnson also saying: “We are going to be making sure we cut business rates for small businesses. I am a tax-cutting Conservative but I want the people who need it most to feel the benefit of the tax cuts,” he added. The Conservatives could also rethink the income tax threshold, with the Prime Minister previously suggesting the level at which people start paying higher-rate income tax in England could rise from £50,000 to £80,000. Chancellor Sajid Javid has also suggested that he was considering scrapping inheritance tax, while the Tories have also promised to look at the pension tax rules for higher earners. (Source: BBC News, 21/11/19)
Labour manifesto and tax plans – Labour has unveiled its election manifesto, confirming plans for tax reform. If elected, the party plans to increase income tax on high earners, with those earning more than £80,000 a year to pay 45% on their income – a rate currently applicable to those earning £150,000 or more. Those earning more than £125,000 a year will face a new “super-rich” rate of 50%. Labour forecasts that the mooted income tax changes will raise £5.4bn per year. The party will also deliver a change for capital gains tax, bringing it in line with income tax. Meanwhile, corporation tax would rise from 19% to 26%, with a 21% rate for smaller firms. The manifesto also shows that the family home allowance would be stripped out of inheritance tax and the marriage tax allowance will be scrapped. Labour would also launch a review into business rates and look at a “land value tax” on commercial landlords, while fee-paying schools will lose their VAT exemption. The Institute for Fiscal Studies (IFS) said Labour’s plans would create “just about the most punitive corporate tax regime in the world”, while some tax advisors warned: “Business owners may face an effective rate of tax of over 60% on their profits.” (Source: Financial Times, 22/11/19)
…while Labour plans to cut business rates – Elsewhere at the CBI event, Labour leader Jeremy Corbyn said his party would reform business rates if elected. He also suggested Labour could raise corporation tax from 19% up to “2010 levels”, when it stood at 28%. Meanwhile, Lib Dem leader Jo Swinson said she would scrap business rates, replacing the system with a levy on landowners. She added that abolishing business rates would cut taxes in 92% of local authority areas and help rebalance the economy. (Source: The Times, 19/11/19)
…scrap the existing IHT system – Labour has also pledged to scrap the existing inheritance tax system, instead imposing a lifetime cap of £125,000 on the amount that can be inherited tax-free. The Lib Dems have previously vowed to tax capital gains as income and plan to introduce a flat 25% rate of tax relief on pension contributions. (Source: The Times, 02/11/19)
…and to offer free full-fibre broadband by 2030 – Shadow chancellor John McDonnell has announced plans to give every home and business in the UK free full-fibre broadband by 2030 if Labour wins the upcoming election. Mr McDonnell told the BBC that the party would nationalise BT’s digital network arm Openreach to create a government-owned, UK-wide network, with shareholders to be compensated by the issuing of government bonds. Funding for the plan would also come from a tax on tech giants like Apple and Google. The Tories said it was “fantasy plan” that would cost taxpayers billions. (Source: BBC, 15/11/19)
What the General Election could mean for investors? – The Telegraph reports that investor bills would double under the Liberal Democrats or Labour. A higher-rate taxpayer with a £60,000 portfolio who sold off just £3,000 of profits each year would be hit with an annual CGT bill of more than £700 under Labour’s plans. Currently, they could sell £12,000 of their profits each year and pay nothing in tax. Under the Lib Dems, the same higher-rate taxpayer would have to fork out more than £12,000 for regularly selling off parts of the £60,000 portfolio over a 10-year period. (Source: The Daily Telegraph, 30/11/19)
Brexit and trade wars will hold back economy, BoE warns – Amid the backdrop of global trade tensions, the Bank of England (BoE) has warned that Boris Johnson’s Brexit deal is likely to hold back growth in the UK economy over the next three years. UK national income will be 1% lower by 2022 than originally thought, the BoE said in its quarterly economic statement, most of which due to “weaker global growth, driven by trade protectionism.” The Bank expects the annual pace of growth to rise from around 1% at the end of this year to more than 2% by the end of 2022, but warned that growth over the next three years will be 1% down on its August forecast. Policymakers believe the UK economy grew 0.4% in the three months to September, double their estimate in August. Meanwhile, two external members of the BoE’s Monetary Policy Committee – which sets interest rates – have called for an immediate interest rate cut. Michael Saunders and Jonathan Haskel voted to cut interest rates to 0.5%, from the current rate of 0.75%. (Source: The Times, 08/11/19)
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