With Andy Burnham looking likely to become Prime Minister this Friday, July 17, this could spell change for UK taxation. People tax planning in Oswestry, Cheshire and beyond will be wondering how their personal finances are likely to be affected by the change of leadership, and a potential new Chancellor of the Exchequer.
Economists have been speculating about the possible impact on the state pension ‘triple lock’ and welfare spending, defence upgrades, capital gains tax and a possible wealth tax. 10-year gilt yields currently stand at around 4.70%, which is approximately 0.09 percentage points lower than June and beneath the 5.15% yield recorded in May, while sterling has remained around $1.32 over the same period.
The big question is whether the new leadership intends to stick to the existing ‘fiscal rules’ that align the Government with a strict spending and borrowing regime.
The markets may welcome a period of relative stability, if the Government pledges to leave income tax, VAT and national insurance untouched. With pressures on the public finances unlikely to subside, the Government may still be forced into raising more revenue, possibly via hikes to capital gains tax (CGT) rates. These are currently lower than income taxes, set in bands of 20%, 40% and 45%. Should the Treasury opt to harmonise CGT with income tax, this could result in people’s property and equity portfolios being targeted to meet the Government’s spending commitments.
The Government may alternatively decide that there are no quick-fix tax-raising solutions to boost the coffers. Time will tell, as economic policy is fleshed out in greater detail over the coming weeks.
