A week today will be the last chance for the Conservatives to cut tax before the next General Election.
They announced last October a reduction in the rate of employee’s national insurance (from 6 Jan 24) and also for the self-employed (from 6 Apr 24) .
However to many people this is not enough as they have previous increased corporation tax for companies with profits over £50,000, increased the dividend rate, reduced the dividend allowance and reduced annual capital gains exemption. Yet worst of all by freezing and not putting up by inflation, the personal allowance (amount you earn before paying tax) and the basic rate tax band (amount you earn before paying 40% tax) they have significantly increased the tax burden on almost all of us by what is known as “fiscal drag”.
Other examples of fiscal drag in UK – VAT registration threshold has remained at £85,000 since 1 April 2017.
The Nil rate inheritance band has been £325,000 since 6 April 2009
The annual gift exemption for inheritance tax has remained at £3,000 since 6 April 1981.
Do Sunak and Hunt really care about the inspiring middle classes. They seem to have taken small business owners vote for granted.
Little help during the pandemic for those self-employed if earnings had previously averaged over £50,000 or to those whom were trading through a limited company.
Then after the pandemic – increased corporation tax, reduced dividend allowance, increased dividend rate, reduced capital gains exemption and a freeze on one’s personal allowance & basic rate band limit.
The government boast about making unlimited the 100% capital allowances businesses can claim on fixed asset additions, yet this was already at £1 million per financial year. Not many small business hold fixed assets worth £1 million yet alone purchase that much in a year. Besides, accelerated capital allowances are only a deferment of tax payment not a true tax cut.
Ireland after Covid, took a different path and its corporation tax rate was reduced to 12.5%.
Their current predicted growth rate for 2024 is 4.2% whereas UK’s is 0.7%.
Final thoughts, don’t expect too much. However as the Conservative party face almost obliteration, they may do something unexpected.
Let’s see what happens next week.
Disclaimer: The views and opinions expressed in the blog are those of the writer and do not necessarily reflect the views or positions of the practice or any entities they represent.