Conservatives to raise NIC threshold to £9.5k

The Conservative election manifesto does not contain any of the predicted pledges to cut income tax but will raise the NICs' threshold and triple lock taxes

The triple lock promises not to raise the rates of income tax, national insurance contributions (NICs) or VAT, in a move likely to limit options for raising additional revenue to fund spending commitments. The same commitment was made in the 2010 manifesto election by David Cameron.

As well as what prime minister Boris Johnson called a ‘tax guarantee’ freezing these taxes, the Conservatives also plan to raise the NICs threshold from £8,632 currently to £9,500 in April 2020, which the party says represents a tax cut for 31m workers. Ultimately the threshold would be pushed up to £12,500, in line with the income tax personal allowance. This would equate to a tax cut of £140 per person a year.

Paul Johnson, director of the Institute for Fiscal Studies, said: ‘The rise in the NICs threshold was well trailed. The ambition for it to get to £12,500 may remain, but only the initial rise to £9,500 has been costed and firmly promised.

‘Most in paid work would benefit, but by less than £2 a week.

‘Another £6bn would need to be found to get to £12,500 by the end of the parliament. Given the pressures on the spending side it is not surprising that this money has not yet been promised.

‘Perhaps the biggest, and least welcome, announcement is the ‘triple tax lock’: no increases in rates of income tax, NICs or VAT. That’s a constraint the chancellor may come to regret.’

Phil Hall, head of public affairs & public policy at Association of Accounting Technicians (AAT) said the NICs threshold increase would mean over 2m people no longer make any contribution at all.

‘However, such a move doesn’t come cheap, the first step of increasing the threshold to £9,500 will cost over £2bn a year, increasing it to £12,500 will cost around £10bn a year. That’s £10bn that will have to be found from tax increases elsewhere unless cuts are to be made.

‘The triple lock may make political sense but from an economic perspective it’s heavily restrictive. The lock leaves serious questions about where money is going to be found to pay for increases to the NICs threshold, not to mention the numerous other multi-billion pound spending commitments the Conservatives have made in recent weeks.’

The Conservative manifesto contains a number of other tax changes, including a pledge for a fundamental review of business rates. As a first step, a future Conservative government would further reduce business rates for retail businesses, as well as extending the discount to grassroots music venues, small cinemas and pubs. It would also increase the employment allowance for small businesses, from £3,000 to £4,000.

The manifesto confirms the seed enterprise investment scheme and enterprise investment scheme would be continued, while the R&D tax credits rate would be increased to 13% and the definitions reviewed. However, entrepreneur’s relief is set to be reviewed and reformed, while the tampon tax will be abolished.

Plans to cut corporation tax from 19% to 17% have been abandoned, resulting in additional tax revenues of £6bn a year by 2023.

The Tories also plan to introduce a new package of anti-evasion measures, including measures to end tax abuse in the construction sector, crack down on illicit tobacco packaging and further measures to avoid profit-shifting by multinational companies to avoid paying taxes. The manifesto states this will bring in an additional £200m by 2023.

There are no changes to inheritance tax, or the pensions taxation regime. The Conservatives have said they would impose a 3% stamp duty land tax surcharge for non-UK residents buying property, but the proceeds will go directly to the budget for tackling rough sleeping. By the fourth year of the period, this is expected to add £120m a year to tax revenues.

Conservative manifesto

Costings

0
Be the first to vote
Subscribe