Chancellor To Simplify Tax System In Budget 2019

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October 19th 2019
Tax Week 29
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Chancellor To Simplify Tax System In Budget 2019

Sajid Javid aiming to lower taxes, borrow to increase investment and reform stamp duty once more.

Newly appointed Chancellor, Sajid Javid, has stated his intentions for the Budget that is set to be delivered this Autumn.

In around two months from now, Javid hopes to be able to simplify the tax system - stating that he wants lower taxes and to benefit those are the lower end of the pay scale.

PM Boris Johnson proposed to raise the higher rate threshold by £30,000 in his leadership contest proposals. Whether the Chancellor is intending to follow through on this is unknown but he has stated he wants to lower taxes to the point where public services can still be maintained. Johnson's proposals were found to only really benefit a limited band of wealthy pensioners.

Currently national insurance and income tax bands are aligned. So if the income tax higher rate threshold was raised by £30,000 so would the upper earnings limit of national insurance. The knock on effect here would see current higher rate taxpayers, paying 20 percent less on their income tax (in that band) but then paying 10 percent more on their national insurance. So only a 10 percent tax cut overall.

Another way to achieve raising the higher rate to £80,000 is to adjust the personal allowance. The £80,000 figure is essentially the personal allowance plus the post-allowance higher rate limit. The current higher rate threshold is £12,500 and the higher rate threshold is £37,500. A total gross income of over £50,000 is required to be a higher rate taxpayer.

The Chancellor could raise the personal allowance by more and thus limit the amount the higher rate threshold is adjusted. This would also directly benefit those working at or around minimum wage.

Javid is also planning to push Stamp Duty on to sellers, rather than buyers. This would mean people selling property would be required to pay the associated stamp duty that normally a buyer would need to find the cash for. It is unknown at this stage as to whether this would be a blanket change for all stamp duty tiers or only for first time buyers. The stamp duty charge for first time buyers was effectively removed in 2017 (as long as the price of the property was below £300,000).

The changes required would likely end up complicating the tax code further if anything and also make the tax disparity between devolved UK countries even more significant.

You can see how these changes affect your pay by using our customisable tax calculator for 2019 where bands and rates can be adjusted using sliders to see how the calculation is affected.

The UK Budget is normally held around the end of October - last year it was on October 29th. Whether or not the date will be affected by UK's exit from the EU is set to be announced.

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