Category Archives: Chancellor

NICked again!

Much has been said today about Hammond’s so called U-turn on changes to National Insurance. It is, of course, no such thing.

If you read Hammond’s open letter to MPs he says that increasing benefits for the self employed has to be matched by increased contributions. However, these benefits will not be explained in detail until later this year. What he actually doing is putting things in the right order. You can’t expect people to cough up extra unless they know what they’re getting for it!

He is pressing ahead with the abolition of Class 2 NI. Unsurprisingly nobody is objecting to that and it does mean that the self employed will now pay less – so the inequality between contributions and benefits is now even greater. If I was an employee, I’d be protesting about that bit of unfairness. It just goes to prove that you really can’t please all of the people all of the time…

At the end of the day, the government has listened to the reaction to the proposed changes and modified its approach. The opposition make much of this, saying the government is in disarray and chaos which is, of course, nonsense.

Personally I saw nothing wrong with the changes announced but they were badly explained. And at the end of the day a government that listens and responds to public opinion can’t be a bad thing can it?


Avoiding corporation tax

There’s been a lot of hot air spouted this week about tax and the self employed, but what about the big boys? You know, the big corporations who make billions and can afford to pay clever accountants and lawyers the rest of us can’t even dream about instructing…

Here’s a round up of what’s going on – and it’s by no means exhaustive :

Caffe Nero : UK sales £274 million CT nil
Vodafone : UK sales £2.7 billion CT nil
Gap : UK sales £426 million CT nil
Waterstones : UK sales £395 million CT nil
EE : UK sales £6.3 billion CT nil

And there is a whole list of other big companies who pay some CT but nowhere near anything proportionate to their sales or real profits. Companies like Apple, Boots, Starbucks, Vision Express…

The list goes on and on, so maybe it would help defuse the row over the taxation of the self employed if the Chancellor was seen to do something about fairness in taxing the big boys as well as the little man?

Fairness shouldn’t be selective…

When is a tax break not a tax break?

What with the new tax year being upon us and all the hoo hah about Cameron’s perfectly legal tax avoidance, this one almost passed me by…

This year, the Chancellor has decided that we will all get a £1,000 tax allowance on our savings if we are basic rate tax payers, anything over this being subject to the standard rate of income tax. “Great” you think. “I’m going to pay less tax on my savings interest!”

Well as Francis Urquart once famously said “You might very well think that” but in this case, you’d be wrong. You’re actually going to be paying more tax. “What?” I hear you yelling. “How can this be?”. Well, I’ll explain :

Currently, there is a 10% band for savings interest up to £2,885 so on the first £2,885 you pay tax of £288. With me so far? Good.

Under the new regime you pay no tax on the first £1,000. So far, so good. But then after the first £1,000 you pay tax at 20%. This means that you pay 20% on £1,885 (£2,885 less £1,000) which amounts to £377 – an extra tax payable by you of £89

Brilliant isn’t it? Trumpet the additional allowance to encourage you to save and then increase the tax on the interest when you do. This is a move of which the Machiavelli of stealth taxes himself, Mr Gordon Brown, would have been truly proud!

Sneaky bastards…

HP sauce

Oh dear! It seems there a bit of a ding dong going on about the relationship between the elected House of Commons and the unelected House of Lords over this Tax Credit business…

Personally, I’m in favour of reviewing the so called tax credit system. It seems stupid to me that in order to encourage people to seek work, the government uses the welfare system to top up people’s wages if they earn under a stated amount. After all, if you can get money for sitting on your arse which is taken off you if you earn more, why not just sit on your arse for the same money?

Tax credits are, of course, a misnomer. They’re not part of the tax system, they’re part of the welfare system and the electorate put the Tory government in place based on a manifesto that undertook to reduce the cost of welfare. ‘Fair enough’ you might think were it not for the fact that Cameron went on TV before the election and stated unequivocally when pressed on the BBC that he would not be changing tax credits. This makes him at worst a liar and at best bloody stupid.

Osborne has buggered this up even further by not increasing the minimum wage at the same time as reducing tax credits – a move worth of the great stealth tax expert Gordon Brown himself! Nice try, but you shot yourself in the foot Gideon.

So the Lords has balked at blocking the move but has voted it should be delayed. The problem now is that instead of cutting welfare before increasing minimum wages, they’re proposing to increase the minimum wage before reducing welfare. Why the hell can’t these people simply employ common sense? It’s beyond me…

Really, you could see it coming. The Lords is flooded with Labour peers put there by Brown and Blair, and Lib Dem peers put there by Clegg as the price of keeping the coalition going. When you think about it, why the hell are we jumping up and down about the unelected bureaucrats in Brussels and then tolerating another set of unelected bureaucrats at home.

What will come out of this? Well, Osborne and Cameron are going to have to rethink and the Lords is going to come under increased pressure for reform.

The Lords has, in my view, had it’s day. It’s fundamentally undemocratic and deeply unrepresentative, There’s loads of Lib Dems in the Lords and practically none in the commons. It’s time it was replaced with an elected Senate and we did it properly…

It’s budget day…

This is a risky post in the early hours of Budget Day – predicting what will happen this afternoon and probably getting most of it wrong. Having said that, let’s have a go…

I’m betting that this budget will be a bit of a damp squib. OK, the usual tax hikes will take place on cigarettes and booze, but I doubt he’ll do much on petrol so I won’t bother to fill the car up on my way to the offie.

Don’t hold your breath waiting to see if there are any tax giveaways either. Don’t forget that the General Election is not until next year and – cynical me – I suspect that the Chancellor will be holding back tax breaks until 2015.

The hot potatoes this year? Well the 40% tax rate seems to be rearing it’s ugly head especially after Osborne was reported to have said that people liked paying higher rate tax because ‘it made them feel successful and aspirational’. This is total cock. Nobody likes paying tax. And it’s been made worse by a trick learnt from Gordon the Snot Gobbler – stealth taxes. Except that this lot call it ‘fiscal drag’.

What is happening is that the basic tax allowance is going up (a good things as it takes the lower paid out of tax) but the level at which you start to pay higher rate tax doesn’t keep pace. They are using the 40% band to pay for the lower rate band. That sounds fine until you think that you are now considered to be ‘wealthy’ at around £42,000. That’s ridiculous.

Another hot potato is property taxes. Average house prices are rising again at last. Unfortunately, an increasing number of buyers are being caught in the bandings of stamp duty. The basic band needs to be raised and the way it works needs to be changed. The rate you pay is based on the purchase value of the property but the rate applied is charged on the whole purchase price. It’s not incremental like income tax and it should be.

And what about the so called mansion tax? The Limp Dumps want to see houses over £2million being taxed annually at 1% of their value. It’s a bloody silly idea. For a start, who’s going to do the valuations and secondly, why should you pay an annual tax just to live in your house? Whack it on stamp duty by all means, but let’s not get silly. It’s unworkable and I suspect the Limp Dumps know it will never happen but it’s a good way of distancing yourself from the wicked Tories when there’s an election coming soon.

What I’d like to see today is a huge increase in the cash ISA allowances, an increase in the 40% threshold to keep pace with the basic rate allowances, and a change in stamp duty to help first time buyers.

I suspect what we’re actually going to get is steady as you go, don’t rock the boat, don’t put the recovery at risk which translates into ‘wait until next year because that’s when the pre-election giveaways will happen’.