All
This is not meant to be a party "political" post more a general observation as in the past I have voted for all three main parties depending on which leader I thought had the charisma to run the country, to be honest. They all seem to say different things but ultimately do the same thing or similar things when in power so it is the charisma of the leader that I think caries things through. Just my opinion.
The more I look at the effects of the July 2015 budget the more I think people and particularly anyone who runs a business or invests is no longer going to think of the Conservatives as the "low tax" party and Labour as the "high tax" party!
If you run your own business there is now little incentive to earn over £43,000 or so quid. With an effective combined corporation tax rate and income tax rate of around 26% effectively (20% CT and 7.5% Dividend tax less £5000 div allowance)and the extra tax you will have to pay following the Budget from April 2016 being around £2,000 (if your gross income is say £10,000 salary and £30,000 dividends) many small business people are going to feel the pain.
If you do earn over £43,000 from your own Limited company and have a mixture of dividends and salary your are now looking at an effective combined CT and IT rate of over 50% of the amount over £43k or so.
Plus if your pension planning is a buy to let property the restriction of tax relief to basic rate on interest and finance costs to basic rate only further has a massive cost if you hit the higher rate tax bands.
I think a fair few people won't bother trying to earn over £43k and will take their foot off the earnings pedal so to speak.
I thought the main thing the Government needs to boost was "productivity" as this would boost tax revenues but I can't see this budget doing anything to boost productivity if anything it may well have the opposite effect.
I also thing a lot of business people and investors who voted Conservative this time will have found their votes leading to a rather shock result following this budget and may well think twice at the next election.
No longer is it Conservatives "low tax" and Labour "high tax". Many will be thinking it is the other way around. 15 years of Labour did not see massive hikes in tax for ordinary basic and marginally higher rate tax payers.
This Budget seems to punish people who run their own companies rather harshly and suddenly.
Just months of a pure Conservative Government majority has seen massive tax hikes for ordinary average earning business people.
All parties and especially the Conservatives banged on about standing for ordinary "hard working people".
People already think twice about employing people with all the red tape, employee rights, etc. but do so if it financially worth the risk of the extra financial responsibility of employing people. Many many small companies will think even harder now about generating the extra turnover needed to employ people and growing their business now following the July 2015 Budget changes I think.
If that does happen the Government may well see tax revenues start to fall which will certainly not help clear the deficit.
Tricky times ahead for sure for people running their own companies particularly and if indeed many small businesses make no effort to generate profits over £43,000 or so I can't see tax revenues for the Government rising either and employment rates might start to tapper off now too which will all hinder clearing the deficit so it could end up being a lose lose situation for the Government and business people as well as the many affected by the tax credit changes.
I can see why the Government has made these changes especially as there is a deficit to clear. However I wonder if the Government has really considered the impact on tax revenues of bashing small and medium size business owners?
The basic rate restriction for interest and finance cost on buy to lets is only going to hurt those struggling to invest in property in the 30s, 40s and 50s as say their pension investment plan as the majority of the new surge in buy to let investors are "cash" purchase older often retired investors fed up with getting little interest on their savings who don't need much of or any mortgage to dive into buy to lets.
Banks need to lend to generate a return of savers. No return for savers means many more with large amounts on deposit will use the buy to let property market to increase their return on their savings. Plus there is the incentive now to pay down or pay off buy to let mortgages.
All in all I think this was a rushed not so well thought through budget that might not have the effect on the deficit that the Government hopes it will.
Time will tell I guess,
Ben
Edited by user 14 July 2015 17:13:39(UTC)
| Reason: typo
