Not enough tax!19 July 2017
'Tax doesn't have to be taxing' is the slogan that was used by our tax collectors to engage the general public in completing and paying their taxes correctly and in good time.
Now we are in a new tax year (2017/2018 started on 06 April 2017), this statement is likely to be more focused as many prepare their tax returns, having started to receive consolidated tax certificates and annual interest statements from their various providers. This year is different to many because we also have the General Election in June 2017, with party manifesto promises bringing into sharp focus what your tax pounds are (and possibly are not) paying for. Indeed, the Institute of Fiscal Studies (IFS) has questioned the affordability of the proposals being made for the next administration, against the current revenue collections being made. This was reported in recent press here: https://www.theguardian.com/business/2017/may/26/conservative-labour-tax-spending-plans-ifs-general-election-manifesto
If the sums don't add up, will we all be paying more tax, irrespective of the outcome of the election?
One positive point from the fall-out following the Brexit vote is that many political parties saw a significant increase in their memberships as people became more engaged in the political process. I believe this is a good sign for the future health of our democracy.
A landslide General Election victory by any political party is not always a good outcome for the UK. Although not guaranteed, it might give the markets confidence; however, any incumbent administration needs a strong opposition to keep it honest, especially at a time of transition as we start our negotiations with Europe to achieve a successful exit.
With the outcome of the General Election becoming clear on the morning of 09 June (and if you call that morning and I seem weary, it's because I stayed up to see it through) then using the generous annual tax allowances to reduce the tax take you suffer might be sensible.
This might include as examples (for 2017/2018):
- ISA allowance: £20,000
- Capital Gains Tax allowance: £11,300
- Nil rate income tax band: £11,500
- Dividend tax allowance: £5,000
- Pension contribution allowance to £40,000 gross from all sources (for most people – some restrictions do apply)
- Pension / HMRC Carry Forward allowance
- Gift allowance of £3,000 (can go back one year if not used)
Each of these options has the potential to save tax, which might be in greater focus post-election if the new administration finds that the promises and income don't add up and confirms that there is not enough tax!
No individual advice is provided during this blog.
Keith Churchouse FPFS
CFP Chartered FCSI
Chartered Financial Planner
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