When Boris Johnson announced his ‘triple tax lock’ during the election campaign in late 2019, it was seen as a good thing by many people because, generally speaking, although we all tend to think certain other people (or companies) should pay more tax, we don’t want it to be us. The Prime Minister promised to freeze income tax, National Insurance and VAT rates for five years – and it seems to have been a clever political promise because it helped to bring about his election victory.
However, my heart sank because I know what it means. It means instead of simply raising – or reducing – tax rates in line with the needs of the nation (the operative word being ‘simply’), the Government will be forced to further complicate the tax system, and invent yet more stealth taxes, in order to raise the extra tax revenue it will need in the coming 5 years. No doubt, we will blame the Chancellor of the Exchequer for this (whoever it may be) yet they will have had their hands tied by the Conservative Party manifesto.
How do I know this? Because David Cameron said exactly the same thing in 2015 before winning that year’s General Election. Consequently, in the following five years, we have ended up with:
i) the dividend tax (effectively a 6% rise in income tax on business owners);
ii) an increase in the Flat Rate VAT scheme percentage for providers of services (effectively killing off the scheme for freelancers and many self-employed people);
iii) attacks on landlords (with extra stamp duty and restrictions on tax relief on mortgage interest);
iv) an attempt by Philip Hammond to increase Class 4 National Insurance for the self-employed (which had to be cancelled after being perceived as an attack on ‘white van man’);
v) a reduction in the pension Annual Allowance from £40,000 to £10,000 for high earners;
vi) and, more recently, attacks on contractors with new IR35 rule changes in 2017 and 2020.
Apart from no. iv), which was cancelled by Theresa May in typical back-tracking style, all of these have resulted in extra complications and extra tax. But, instead of penalising all taxpayers equally, they focus on areas which do not attract public sympathy and/or public interest. For example, if PAYE had been increased by 6% in 2016, there would have been a massive outcry and it would have led the news for days. But when George Osborne brought in the dividend tax, which effectively increased income tax by 6% on many thousands of UK business owners, there was hardly a murmur.
And now we have a Budget looming in March 2020 with a Chancellor trying very hard to work out how to raise more taxes to fund the Conservative’s promised extra spending, without simply raising VAT or Income Tax rates. Inevitably it will mean more stealth taxes and more complications – probably attacks on pensions (removing higher rate tax relief), restrictions on Entrepreneurs’ Relief for Capital Gains Tax and other tax changes as yet unknown.
I used to laugh at Gordon Brown when he used to talk about ‘simplifying’ the tax system while creating hundreds of pages of new tax legislation. But, if anything, things are getting worse for lovers of simplicity.