In advance of the election I have read the proposed plans of four of the contenders and have given my view of the pros and cons of their plans for tax.
Let's start with the Labour party which plans to:
-Re-introduce the 50% top rate of income tax for people earning over £150,000
-Introduce a "mansion tax" on houses worth over £2m
-Re-introduce the lower 10% starting rate of tax
-Cut business rates for small firms in 2015 and freeze them in 2016
More money for HMRC coffers
Help for small businesses
Possible manipulation of the housing market prices as people seek to avoid the charge, just like they have done with stamp duty. The suggestion that people could “roll up” the tax due and pay it on their death may well be a way to allow the proverbial little old lady in her old family house to avoid paying cash now, but is surely effectively an additional inheritance tax by the back door and a worrying precedent for “spend now tax later”.
The raising of the personal allowance ought to mean a 10% tax rate is not needed. After all the 10% policy failed under Gordon Brown. It just adds more complexity to the tax system.
The 50% rate is really 52% when National Insurance is taken into account and it seems inequitable for anyone to give more than half of what they earn to HMRC. Its worse though for lower earners, with a 62% band when people lose their personal allowance at £100,000 and for example a whopping 73.46% for someone with 4 children crossing the £50,000 threshold and having child benefit withdrawn. In recent years the tax system has become more complicated and more unfair to middle income earners. More people are affected by child benefit and personal allowance withdrawal than will be affected by the 50p rate over £150,000.
Tomorrow we’ll report on the Conservative’s tax policies