Boris Johnson: From tax to pensions, what may Prime Minister role mean for YOUR finances?
BORIS JOHNSON has won the Conservative Party leadership race, meaning he will become the Prime Minister in the UK. He's addressed personal finance matters such as pension tax relief changes and an increased higher-rate income tax threshold. What could his new PM role mean when it comes to personal finance?
Boris Johnson has been elected as the Leader of the Conservative Party, and will become the Prime Minister of the UK tomorrow. When it came to votes, Mr Johnson received 92,153, while fellow Jeremy Hunt got just over a third of the votes with 46,656. While his plan for Brexit will be something many people are focused on, Express.co.uk takes a look at what the number of campaign pledges he has made may mean for the population’s finances. Research called “Brexit Broke Me” which was conducted by FairMoney.com, suggests that a fifth of Britons - 10.5 million - believe that they are in the worst financial position they have ever been in.
The statistics also highlight that 43 per cent of the population (22 million people) don’t understand how Brexit will affect their household bills.
Meanwhile, Tom Selby, senior analyst at AJ Bell, has considered how Mr Johnson’s campaign proposals could affect people’s finances and assesses the likelihood of them actually being introduced.
Increasing the higher-rate income tax threshold to £80,000
During the leadership race, Mr Johnson promised to raise the 40 per cent higher rate income tax threshold by more than 60 per cent - from £50,000 to £80,000.
Mr Selby said: “It didn’t take Johnson long to get his imaginary chequebook out during the Tory leadership race as he promised to raise the 40 per cent [higher rate band] income tax threshold by over 60 per cent, from £50,000 to £80,000.
He continued: “This would represent a £9 billion tax boost to 4 million people, according to the IFS, benefitting the top 10 per cent of earners to the tune of almost £2,500 a year.
“Johnson also hinted the National Insurance [(NI)] thresholds could be raised to help pay for the measure. At the same time, he signalled his intention to increase the point at which NI payments kick-in to boost lower earners.
“While specifics were hard to come by in the Johnson campaign, the IFS estimates every £1,000 increase in the NI primary threshold - which currently stands at £8,632 – would cost the Treasury £3 billion.
“Taken together we are talking about a package of reforms costing up to £20 billion at a time when a potentially damaging No Deal Brexit appears to be looming ever larger.
“They are certainly unlikely to be introduced overnight, and indeed they might never see the light of day at all if a general election is called.
“That said, it is not beyond the realms of possibility that they would form part of a Brexit No Deal package designed to provide short-term life support to the economy.”
So, what are the likelihood of the higher-rate income tax threshold being increased? According to Mr Selby, the chances stand at 7/10.
Pension tax relief changes
“Johnson has also promised to ‘fix’ the pension tax crisis currently engulfing the NHS,” Mr Selby said.
“The issue, caused by the tapering of the annual tax-free allowance for people with total earnings above £150,000, has added significant strain to already overburdened hospitals as senior doctors refuse shifts to avoid crippling tax bills.
“The Department of Health and Social Care yesterday proposed flexibilities in the scheme so GPs and high-earning consultants can opt to pay less into their pension and in turn get lower pensions.
“This, it argued, would mean they could reduce or even eliminate the risk of being hit by annual allowance charges.
“This complex fudge is unlikely to appease those affected, however, and while Johnson has not said how he will ‘fix’ the problem, scrapping the taper altogether would be the obvious solution.
“This could then be used as a starting point for a broader review of the pension tax regime, with a central aim of simplification and increasing the number of people saving for retirement.
“If Johnson does ditch the taper, however, he would blow a £1 billion hole in the Treasury’s coffers which would need to be plugged.”
The chances of it actually happening? Mr Selby said it looked like it stood at 6/10.
David Everett, partner at pension consultancy LCP, also commented on the matter.
“Insofar as pensions policy is concerned, an early test will be what ‘fixing the Lifetime allowance’, promised by Boris Johnson in his leadership campaign, looks like,” he said.
“We have no idea at this stage what he intends to do, but it is worth mentioning that the complexity and unintended consequences of lifetime and annual allowances we see today is a direct result of successive Government tinkering with the pensions tax architecture to create a source of funds following the 2008/09 economic downturn.
“From the DWP’s point of view, once any ministerial changes have bedded down, the Pensions Bill should be ready to go – with key measures including additional Regulator powers and a new DB funding framework. It is not clear whether measures to assist DB consolidation will make the cut.
“But this Bill will only see the light of day if it is part of No. 10’s game plan and only if the Johnson Government survives early tests that will surely come its way.”
Stamp duty overhaul
Another proposal which has been reported is for a reform of Stamp Duty Land Tax, with the scrapping of the tax on homes worth less than £500,000.
Mr Selby said: “This would likely be one of a series of emergency Budget plans unveiled if the UK leaves the EU without a deal.
“The proposed stamp duty cut would represent a major giveaway of up to £10,000 for first-time buyers and £15,000 for other property buyers.
“Clearly that’s potentially good news for those looking to buy a home, although stimulating demand in such a manner without building more houses risks simply stoking house price inflation.”
So, what are the chances of it happening? According to the senior analyst, the likelihood could stand at 80 per cent.
To read the full article click here: https://www.express.co.uk/finance/personalfinance/1156789/boris-johnson-news-prime-minister-brexit-pension-income-tax-stamp-duty
