Spring Statement: A clear direction of travel?
Following the Chancellor’s announcements, future plans for tax policy seem clearer.
Replies (4)
Please login or register to join the discussion.
"People’s experience of the tax system must be factored into the Tax Plan."
So, Paul, we can safely say that QU for the self-employed will now be kicked into touch?
I'd dearly like to hope that the alignment of the NI and tax thresholds is the first step in aligning the taxes more fully. This major update to the tax system removes the biggest hurdle to adopting the OTS recommendations from 2016, as below (with a few tweaks from me):
- separate er's NI from ee's NI by dissociating er's NI from individual employees and remove employees' own (secondary) thresholds and base the er's NI on the payroll as a whole
- make ee's NI cumulative, using the tax code as the in-year lower threshold for ee's NI so that P45's can be used to calculate cumulative NI in a new job, as well as tax (and no NI threshold in second job, just as is the case for tax with its BR code) - this may be slightly complex, as the tax code currently takes account of other income not subject to NI, so the P45, in the short term, may need to also disclose cumulative earnings and deductions to date for NI purposes
- once ee's NI is cumulative, this obviates the need for directors to have their own NI calculation (although they would not then get a full year's NI allowance in month 1, as at present, but build it up through the year, as for tax)
- simplify the employment allowance exception rules for companies that have a sole director as the only employee (which is easy to get around by employing someone part-time for one week each year at either the LEL or PT, depending upon whose interpretation of the legislation you believe) by only offsetting the EA against non-directors' er's NI (or the equivalent if er's NI is based on the whole payroll), even if there are other employees, as the purpose of the EA was to replace SSP and encourage employment, not give sole director companies a tax break
- remove whole swathes of legislation by calculating Class 1 ee's NI on the same base as PAYE income tax
- merging NI and tax is politically complicated, as the electorate won't like the idea that the basic rate of tax rises from 20% (2022/23) to 32.25% (2024/25 @ 19% plus 13.25%) even though the total PAYE deduction is exactly the same, but the legislation and calculations would still be dramatically simplified
I look forward to seeing further alignment along these lines announced in the Autumn budget.
I certainly think those in retirement and BTL landlords etc, now paying this new unified rate on pensions etc, might withhold their vote from whoever introduced this higher tax that applied to them. And if not applied to these classes there would likely be a backlash from the younger generation (paying this and student loan deductions ) against the politicians when this fact was sprayed all over the media.
Seems a political no win to me.
Whilst yes, such taxes ought to be unified, in reality the political pain is likely too much- it would also not be helped by the new Health and Social Care Levy, people might view matters (possibly correctly) as effectively merely pumping up IT as they would likely never trust any government to later not just bump up the HSCL so as to replace NIEE.
When seeking a clear direction of travel in the UK, Guildford is a splendid destination to consider. This picturesque town, surrounded by the stunning Surrey Hills, offers a delightful mix of history and modernity. Exploring Guildford can be made remarkably comfortable using local taxis, ensuring you can soak in the sights and experiences hassle-free. Recently, I had a wonderful experience traveling there by taxi to guildford, allowing me to fully appreciate the beautiful architecture, charming streets, and vibrant local culture. Guildford is indeed a prime example of the incredible destinations you can discover in the UK.