According to the Financial Times (‘Starmer and Reeves drop proposal to increase income tax rates in Budget’, 14 November), the Treasury just U-turned on tax measures they never even announced.
Now we’re back to square one. Except that the gilt markets are spooked and government borrowing just got more expensive.
What about tax? The abandoning of the 47% tax rate and LLP NICs may have been welcomed by those affected. But here’s why everyone else should be worried. An economy thrives on certainty. A 47% income tax rate would sting. LLP NICs would hurt partnerships. But at least businesses could plan for them: clear measures, predictable impacts, straightforward calculations.
This won’t be the case for the measures the Treasury will need to bring in instead. Why? Income tax has the widest base; more people pay it than any other tax. Without touching it, the Treasury has to get creative to raise revenue. Creative means complicated. And complicated means uncertain.
As the FT puts it, we can expect a smorgasbord of tax measures to fill the hole. Think pension raids (hitting your retirement savings), stealth threshold freezes (everyone pays more without realising), new windfall taxes (discouraging investment), council tax reform (homeowners beware). Each adding layers of complexity, generating more uncertainty. Not to mention the expensive advice required to navigate them.
Given a choice between a tanking gilt market and higher but simple tax rates, I’d choose economic stability every time.
The irony? We may soon miss the clarity of the tax rises that never were.
A window of opportunity?
So it seems the Government has now ruled out an increase in income tax, an exit tax and a tax on LLPs.
I understand these have been dropped in favour of a window tax. Having heard that people avoid tax, the window tax will motivate people to block up their windows. This in turn will require more builders and carpenters which will increase employment, the sudden frenzy to block up windows will increase economic activity in the country and will both raise GDP and increase the profits of builders and carpenters which will raise tax receipts. Job done.
According to the Financial Times (‘Starmer and Reeves drop proposal to increase income tax rates in Budget’, 14 November), the Treasury just U-turned on tax measures they never even announced.
Now we’re back to square one. Except that the gilt markets are spooked and government borrowing just got more expensive.
What about tax? The abandoning of the 47% tax rate and LLP NICs may have been welcomed by those affected. But here’s why everyone else should be worried. An economy thrives on certainty. A 47% income tax rate would sting. LLP NICs would hurt partnerships. But at least businesses could plan for them: clear measures, predictable impacts, straightforward calculations.
This won’t be the case for the measures the Treasury will need to bring in instead. Why? Income tax has the widest base; more people pay it than any other tax. Without touching it, the Treasury has to get creative to raise revenue. Creative means complicated. And complicated means uncertain.
As the FT puts it, we can expect a smorgasbord of tax measures to fill the hole. Think pension raids (hitting your retirement savings), stealth threshold freezes (everyone pays more without realising), new windfall taxes (discouraging investment), council tax reform (homeowners beware). Each adding layers of complexity, generating more uncertainty. Not to mention the expensive advice required to navigate them.
Given a choice between a tanking gilt market and higher but simple tax rates, I’d choose economic stability every time.
The irony? We may soon miss the clarity of the tax rises that never were.
A window of opportunity?
So it seems the Government has now ruled out an increase in income tax, an exit tax and a tax on LLPs.
I understand these have been dropped in favour of a window tax. Having heard that people avoid tax, the window tax will motivate people to block up their windows. This in turn will require more builders and carpenters which will increase employment, the sudden frenzy to block up windows will increase economic activity in the country and will both raise GDP and increase the profits of builders and carpenters which will raise tax receipts. Job done.
