Last week, the Conservative party won the general election with a significant majority, and the party’s policies will therefore set the tax agenda for the next five years. This article summarises some of the key proposals put forward by the Conservative party during the election campaign.
Following a U-turn in the Conservative party manifesto, the rate of corporation tax is expected to remain at 19%, compared to an anticipated decrease to 17%. Therefore, businesses will need to revisit their deferred tax calculations.
The government is expected to stick to the existing plans to introduce a cap on the amount of research and development tax credits a qualifying company can receive in any one year. In contrast, larger companies, are set to see the value of the research and development expenditure credit rise from 12% to 13%.
Other commitments made by the Conservative party include an increase in the relief available under the new structures and buildings allowance from 2% to 3% a year, a “fundamental review” of the business rates system and a pledge not to raise the rate of VAT during the next parliament.
The Conservative party has pledged not to increase National Insurance Contributions (“NICs”) for employers. In addition, to help small employers, an increase in the NIC Employment Allowance from £3,000 to £4,000 has been proposed.
Employers should nevertheless prepare for an increase in the National Minimum Wage from April 2020, as the government intends to increase it incrementally to £10.50 within five years.
The Prime Minister made an election commitment not to increase income tax or NIC rates for the duration of the new parliament. The Conservative party has also pledged to raise the annual NIC starting threshold for employees from £8,863 to £12,500, with an immediate increase to £9,500 from April 2020.
In return for the support of self-employed voters in the election, the Conservative party has promised a full review of the support given to the self-employed, including access to finance, navigation of the tax system and broadband accessibility.
Further reform is also expected in respect of capital gains tax (“CGT”). In addition to planned changes to tighten the CGT reliefs available on selling residential property and trigger earlier payment of any tax due, from April 2020, the Conservative manifesto also included a pledge to “review and reform” Entrepreneurs’ Relief.
Please get in touch with your usual Ryecroft Glenton contact on 0191 281 1292 if you would like to discuss any of the above in further detail.