Post election analysis

Post election analysis;  Now the dust has settled on a remarkable election result, I thought it would be worthwhile looking at some of the measures proposed and pledged by the Conservative party.

Hopefully the majority Conservative Government will find it easier to implement their promises in full without the horse-trading and concessions to minority parties in a coalition:

A law guaranteeing no rise in income tax rates, VAT or National Insurance before 2020

This seems remarkable, tying the Chancellor’s hands by promising a law to prevent tax rate increases.  But, it only applies to rates of tax, not to extending the scope of tax. For example he could extend VAT to goods currently exempt or zero-rated.

There was also a separate pledge in the budget speech to keep the Corporation tax rate the same and even look to reduce it below the current 20% rate.

Ensure workers on the minimum wage who work 30 hours pay no income tax

I’m not sure whether this really means anything at the moment, as the increase in the National Minimum Wage already announced for October 2015 at £6.70 per hour would already be below the Personal allowance of £10,600 per year.

However, there is a desire to increase the NMW to £8ph by 2020 which would result in a personal tax allowance of £12,480.  This is in line with the aim of increasing the personal allowance to £12,500 by the end of the parliament.

Increase the Inheritance Tax threshold on family homes to £1m by 2017

This will be by way of an additional allowance where the home is passed to certain beneficiaries on death and doesn’t mean a general nil rate band of £1m for all estates.  It is still a very useful exemption that will remove Inheritance Tax from a significant number of estates.

Raise the point at which higher rate tax of 40% is paid to £50,000

This is a welcome move for middle income families who have suffered from a real reduction in the higher rate limit for many years.  It is still less than the higher rate limit would have been had it increased by inflation over the last parliament.
All of this seems positive and will provide real incentives for people to keep more of their well-earned wealth.

A word of caution though as the Chancellor has also signalled his firm desire to bring the deficit under control which, if tax rises are off the agenda, then spending cuts are the only alternative.  So there will be some paid still to be felt even if you have a little cash more in your pocket.