Election Special: Tax plans – bathtub style!
Anyone who’s been on our basic finance or sole trader training will know that we have a bit of fun with how income tax works.
Sole Trader tax (basically income tax) is reduced to a bathtub scenario, where your turnover goes in the tub then some comes out into buckets for income tax and national insurance.
I thought it would be fun to put together some bathtubs for the three “main” UK parties based on what they’ve said in their manifestos.
Here’s the bathtub for what happens at the moment:
Now let’s have a look at the parties’ proposals. I’ve highlighted proposed changes with orange circles.
Liberal Democrat bathtub
The Lib Dems say they’ll put more money in the NHS by putting 1 percentage point on income tax. It’s not clear to me whether they mean every tax band goes up by 1% or just the main 20% income tax band.
Labour unapologetically say they’ll introduce a new tax band for people earning more than £80K. It’s shown here in purple. They’ll also reintroduce the top rate of tax at 50%, to kick in on income over £123K. (The top rate used to be 50% until George Osborne reduced it to 45% a few years ago.)
The Conservatives haven’t shown much detail in their manifesto. They’ve simple talked about being the party of low tax and have pledged to keep to George Osborne’s plans to raise the points at which the 20% and 40% rates kick in between now and 2020.
This means they might or might not increase national insurance, which they tried to do in the last budget. (They’d forgotten David Cameron’s 2015 manifesto pledge not to do that, and had to change their minds.)
Disclaimer: It’s just a bit of fun. If you want the full details of what all the parties are proposing, get stuck into the manifestos. And enjoy voting on Thursday!
Posted on 06 June 2017