Two candidates for Prime Minister: two different tax plans. How might they affect you?
As you know, Mr Hunt and Mr Johnson are both in the process of promoting themselves to Conservative Party members, before the final stage of electing a new leader of the party and the country. They have discussed different views on how they will tackle assorted issues, including taxation.
What is Mr Johnson’s position?
Mr Johnson’s hanging his tax plans on the main idea of increasing the Higher Rate Taxation threshold. He wants to move it from the current £50,000 to £80,000. This is very attractive to taxpayers who earn between £50,000 and £80,000 and are paying 40% income tax. They’ll see that half to 20% on that part of their income. Only the wealthiest UK taxpayers will benefit from this income tax cut.
This would apply in England, Northern Ireland and Wales, with Scotland continuing to have the devolved power to decide on their own income tax brackets and amounts.
While those who live off investment income and wealthy pensioners save money with this idea, the Treasury itself loses. According to the Telegraph’s figures, this would be £9.6bn each year. Mr Johnson says that raising NICs and the £26.6bn no deal Brexit pot will pay for the tax change.
What are Mr Hunt’s tax plans?
Mr Hunt has put a wider range of plans on the table, to “turbocharge the economy attracting inward investment and driving growth.”
- Increase NICs threshold – meaning that the amount you have to earn to be liable to pay NICs would be higher
- Decrease Corporation Tax to 12.5%
- Reduce interest rates on student loans
- Additional £12bn into Defence budget – taking it to 2.5% of GDP
Obviously they are beneficial to the specific groups directly impacted, but these tax measures are also intended to generate activity in the economy as a whole.
Each of these ideas has its own price tag: £1bn to decrease student debt, £13bn to reduce corporation tax and £3bn for every £1,000 increase to the NICs threshold. And by directing spending to these areas you are, by definition, not investing in others.
Would any of these policies directly affect you?
Perhaps you’re just into the Higher Rate tax bracket and you’d welcome its increase to £80,000. Maybe your children will really benefit from that student loan interest reduction. Or perhaps none of them make any different to your financial life at all. At the moment, the only people’s opinions that matter are the Conservative Party members that must elect their new leader, and our new Prime Minister.