As Boris Johnson steps up his campaign to become Prime Minister and prepare for leaving the EU (Brexit), he announced yesterday (10/06/2019) of his radical plans for revising current PAYE Thresholds, specifically the 40% income tax threshold.Under his proposal, threshold for hihe-earners would increase from £50k per annum to £80k per annum, a staggering rise of £30k.
Current tax laws see higher rate tax payers (who earn £50k or above per annum) pay a minimum tax contributin of 40%, the table below illustrates the income tax rates and thresholds in 2019 which are used when calculating Pay As You Earn (PAYE).
|Band||Taxable income||Tax rate|
|Personal Allowance||Up to £12,500||0%|
|Basic rate||£12,500 to £50,000||20%|
|Higher rate||£50,000 to £150,000||40%|
|Additional rate||over £150,000||45%|
In this section, we include the 'Boris Johnson Tax Calculator', a tool which illustrates how individual salaries could look should this initiative be put into effect.
We also provide an alternative tax calculator, which, instead of increasing the higher rate tax threshold, increases the personal allowance threshold to £30k, (a very ambitious figure which would immediately impact every single working person in the UK who earns over £12.5k per annum). Increasing the personal allowance would allow individuals to take home up to £2,400 extra each year, which is up to £200 per calendar month.
Increasing the higher rate from £50k to £80k per annum will effectively allow individuals to earn up to £6k more per year, that is a very healthy £500 extra each month. Whilst this is clearly excellent news for higher earners and will undoubtably be well received, we believe that a fairer solution which could help all communities, particularly those who struggle financially and are forced to claim benefits to make ends meet (despite many being in employment), would be to 'up-lift' the personal allowance to £30k. This fairer solution puts (up to) £2.4k in every workers pay packet, not just the lucky few who are higher earners.
Increasing the higher rate tax threshold from £50k per year to £80k per year will cost an estimated £9.6 billion pounds per year.
Boris Johnson plans to fund the increase in the higher rate threshold from £50k to £80k by using the funds set aside for a Brexit 'No Deal' solution. Currently, the Treasury has set aside £26.6 billion pounds in its preparation for a 'No Deal' Brexit. This contingency money is to provide 'fiscal headroom', effectively allowing for flex in the economy as the UK economy adjusts after leaving the European Union (EU).
In truth, to further his political ambitions through altering the tax thresholds. This would be an excellent solution for increasing the flow of cash in the economy. Unfortunately the increased cash flows would not necessarily circulate as effectively, nor as widespread as they could if the tax adjustment were made to the personal allowance rather than an increase to the higher rate. The higher rate tax increase is clearly directed toward traditional Conservative Voters, the majority of whom will already benefit from a higher standard of living. This raises the question of where the extra money would be spent. Holidays, luxuries or in property perhaps? The risk of this particular group having upto £6k extra in their pocket is another housing boom, further driving up the cost of house prices and putting mortgages further out of reach of the average working person.
It's all well and good seeing what the 'Boris Johnson Plans' could look like but we feel it's better to be able to calculate and see what your salary would look like after an increase of the higher rate tax threshold to £80k. The following salary examples provides tax calculations for PAYE, NIC's ENIC's and pension contributions. The Salary Examples also illustrate the total cost of the employment for Employers. Note that increasing the higher rate tax threshold to £80k will not impact the cost of employment for employers. You can enter your salary below to access a Salary example based on your annual income. Click on one of the salary examples highlighted below to see results of how the changes to the higher rate tax threshold would look in comparison to current tax thresholds and also a comparison to our suggestionof increasing the Personal Allowance to £30k
Anyone who works should not need to claim benefits in order to make ends meet - this if false economics and increases pressure on higher rate tax payers! Why not use this opportunity to adjust that imbalance and make a working life pay for all.
In France, the 'Gilet Jaune' began taking to the streets, when President Macron increased tax relief for big businesses, at the expense of the low-earners and people on benefits!
We are interested to hear what you think:
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