The new prime minister has said he has some ideas up his sleeve which will ‘dramatically affect tax, investments and housing’. Of course, these could come to nothing. But if he does manage to put some of these plans into place, the impact could impact all of us. Let’s take a closer look.
Higher rate tax threshold
At present, income tax increases from 20% to 40% on taxable earnings over £50,000. Boris Johnson has proposed that this threshold should be increased to £80,000. Sajid Javed has also offered similar tax cuts when he was campaigning for the leadership position.
Good for: Anyone earning over around £62,500. (£50,000 plus the personal income tax free allowance of £12,500 this year). It will save a chunk of tax, which is very welcome for many people in this earnings bracket. It will also be good news for people who qualify for means-tested benefits as a result of being basic rate taxpayers. Childcare vouchers are a good example of this because a basic rate taxpayer can request £243 pm in vouchers where a higher rate taxpayer can only have £124 pm.
Higher National Insurance threshold
There is some suggestion from the new prime minister that he’d like to revisit National Insurance so lower earners pay a bit less. At the moment, those earning less than £8,632 pay nothing. Earnings from that level up to £50,000 pay National Insurance at 12%, then 2% for earnings over that level.
Good for: Lower earners. Also good for business owners, who typically take a salary up to the National Insurance threshold.
Amid the ongoing headlines that NHS staff are turning down shifts and retiring early due to penal tax charges that have arisen from their pension contributions, Boris Johnson says he is going to find a ‘fix’.
Good for: Higher earning NHS staff and other public sector workers. It would be even better if the tapered annual pension contribution allowance were to be scrapped for everyone.
Social care costs
Many of us are concerned about paying for the costs of nursing or residential care in old age. Boris Johnson has promised more money to ‘fix’ social care. Even if this transpires to be a simple cap on the total cost an individual should be expected to pay, it would be welcomed.
Good for: Those people in later retirement for whom this is a serious concern.
It’s reported that Boris Johnson is considering getting rid of stamp duty on all house purchases of less than £500,000. The aim is to boost the UK’s property market. This is a big increase from the current position, where stamp duty starts to apply over £125,000 (or £300,000 for first time buyers).
Good for: People wanting to buy, or move house. Although there hasn’t been any suggestion yet that the popular Help to Buy scheme will continue beyond its planned end date of 2023.
What should you do? It’s never a good idea to make decisions based on statements from politicians. In all likelihood, some of these ideas will develop into something, others will change shape and some will be scrapped altogether. Only when we know what the facts are, can we really determine if any action is needed.