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Johnson proposes £3,000 tax cut for higher earners
Johnson’s announcement of his proposed tax cut is certainly grabbing the headlines but it is worth pausing to reflect on the ways it might impact professional advisors and their clients.
Journalists quick out of the gates this morning have estimated that raising the threshold at which 40% income tax is paid from £50,000 to £80,000 will save an individual earning £80,000 per year around £3,000. Indeed, for pensioners the cut could be even more beneficial, with estimated savings of up to £6,000 due to the fact that pensioners will not be liable for the increase in National Insurance which is feted to accompany the cut to help pay for it.
With more take-home pay in their pockets, tax payers may feel less inclined to take advantage of tax mitigation opportunities such as Gift Aid or maximising their pension contributions.
One can be confident that Mr Johnson and his team have rigorously focus-grouped the proposed plan, but it is worth noting that the tax cut is not being achieved by lowering the income tax rates, which Mr Johnson’s rival for the Conservative leadership Dominic Raab suggested only last month, but instead raising the threshold at which higher rate income tax is paid.
10 June 2019
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Article contributor
Aidan
GrantSenior Associate
Specialising in International trusts, tax & estate planning, UK trusts, tax & estate planning and US/UK Tax & estate planning
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