Jeremy Hunt’s Budget What it didn’t say.

Jeremy Hunt’s Autumn Statement in the House of Commons on 22nd November 2023 was not what you would expect from a low-tax, small-state Conservative party. Although the cut to national insurance of 2% was welcome, as were tax breaks for capital investment in IT, the corporation tax rate remains at 25% for companies with over £250,000 profits. 

Compared with the corporation tax rate of 12.5% in Ireland, which has an excellent workforce that can still recruit from across the EU and speaks English with good communication skills, it is just too high. These tax rates keep making the businesses in our country uncompetitive and a place to do business unattractive.

Then there is the ‘fiscal drag’. Tax thresholds - the income level at which the tax rate goes up, traditionally went up with inflation. However, in 2021, Sunak froze them, and they are set to remain frozen until 2028. 

The Office of Budget Responsibility (OBR) estimates that the threshold freezes will raise a combined £44.6 billion in extra revenue by 2028-29. This freeze will drag more earners into the higher tax bands.

In 1991 - 92, only 3.5% of taxpayers paid 40% tax (or above). By 2028, it is estimated this percentage will rise to 14%. This is an unwelcome stealth tax and will hurt those who Sunak most hopes to keep loyal.

Student loans remain a disguised tax on anyone earning over £22,015 a year. A taxpayer with an outstanding loan pays 9% of their income on top of their income tax every year. Given that this generation is struggling to pay their rent or, if they are lucky enough to be on the property ladder, their mortgage, this is an unfair tax rate. Once again, this high tax rate on a sector of the population who may have been traditional Conservative voters will impact next year’s election.

The next area of taxation, which is ridiculously high, is taxes on homes. To buy a property to live in, the purchaser must pay tax on the value over and above the threshold. The first £250,000 is at zero rate of tax, the next £675,000 up to £925,000 is at 5%, the next £575,000 from £925,000 to £1.5 million is 10%, and the remaining amount above £1.5 million is at 12%.

However, if you are buying a second home, whether it is your primary residence or not you pay an additional 3% of the tax above each threshold.

Additionally, if you are not a UK tax resident; a foreign buyer - you must pay an additional 2%. In Damien Jeffery's podcast featured in this week’s newsletter - he says that the top rate of SDLT is 17%. If a foreign buyer buys a property worth £10 million they need to pay an eyewatering £1.7 million.

For first-time buyers, there is a relief. There is no SDLT for homes up to £425,000 and 5% on the portion from £425,001 to £625,000. But you cannot claim the relief if your property is more than £625,000.

As I discussed with Damien on today’s podcast, the tax needs to be added to the usual commission of 2% for the selling agent and 2% for the buying agent who has access to properties not featured on either Zooplo or Rightmove. These properties used to be at the higher end but are now across the price ranges.

Again, this is hitting the very people who are most likely to be traditional Conservative voters. 

Is it hardly surprising that Sir Keir Starmer and his Labour Party are expecting a victory in the expected election of next year? Under this Conservative Party we are paying too much tax!