The various political parties have all made bold promises in the run up to the General Election 2019. Most have been about increased spending if elected, particularly extra money for the NHS. Although many of the spending pledges will be funded out of increased borrowing, some will be from general taxation.
What taxes will they raise to fund extra spending in the NHS?
The Liberal Democrats policy would be to increase the rate of Income Tax by 1% to raise £35 billion a year for the NHS and social care.
The Conservative and Labour parties propose to provide extra money for the NHS from Corporation Tax changes.
Corporation Tax is scheduled to be reduced from 19% to 17% from 1 April 2020. However, in a speech to the Confederation of British Industry (CBI) Boris Johnson announced that, if elected, the Conservative Party would keep the rate at 19% to provide an extra £6 billion for extra NHS funding.
Despite Jeremy Corbyn telling the CBI that the Labour party is “not anti-business” the party have previously announced that they would reverse the recent cuts in Corporation Tax. Note that the rate of Corporation Tax was 28% back in 2010 at the end of the last Labour government.
It will depend on who wins the General Election on 12 December 2019, as to which policy will enacted. Businesses will either have to pay more Corporation Tax, or individuals will end up paying more of their salary in Income Tax.
Will there be more money for social care?
In every General Election since 1997 there have been pledges by the various political parties to resolve the funding of care for the elderly in the UK. We are still yet to to see one of these pledges actually happen. Teresa May even did a U-Turn in 2015 with her proposal for a so-called ‘dementia tax’.
It’s no secret that the current elderly care system is in crisis. It will be interesting to see how the Conservative, Labour and Liberal Democrats, political manifestos propose to solve the problem.
Although not strictly a tax matter, for many families funding care fees for the elderly is a bigger issue than Inheritance Tax (IHT). The current rules in England and Wales require the family to make a contribution to their elderly’s care fees where the person’s assets exceed £23,250. For many, the most upsetting is this figure includes the value of the ‘family home’. Meaning that many families have to sell their loved ones home in order to pay for their care.
The normal Inheritance Tax planning strategy of giving wealth away and surviving for seven years does not necessarily work. This is because the social care rules are based on the concept of “deliberate deprival” of the estate. If the local authority consider that the transfer of assets was done deliberately to deprive the estate of assets to avoid paying care fees then the transfer is classed as ineffective.
Read more about how we can help you to pass your wealth down to your family in the most tax-efficient way here.
If you would like more information or help with any tax related issues then please contact us by email or on 01295 250401.