Will brexit affect our taxes?
Now that the dust has settled on the referendum results there have been many words spoken by many experts regarding the potential pros and cons of what it all means for Britain. But one of the things which many people want to know is – how will the result affect them and their finances personally.
Basic rate tax
The good citizens of the UK were subject to many stories and threats of rising prices in the shops and falling property values, among other things and before the vote took place chancellor George Osborne referred to the basic tax rate. He suggested that the basic rate could see an increase of 2p (currently 20p in the pound) whilst the higher tax rate (currently 40p) could increase by 3p. He also said that inheritance tax could potentially rise from 40p in the pound to 45p. However, inheritance tax is already a deeply unpopular tax and any government looking to impose a tax rise may well be shooting themselves in the foot. Any tax rises would go against the promises made by the government at the last election so it is much more likely that the current period of austerity may extend beyond 2020 instead. According to the Institute for Fiscal Studies there may need to be curbs on spending for a further two years.
The VAT rate on fuel is currently 5%, which is the lowest figure allowed under EU rules, and the vote leave campaigners have pledged to abolish this altogether however don’t hold your breath on this one.
The question of VAT and customs duty is a complex one. However the document produced by the government which details the process for withdrawal from the EU says that because the UK has up to two years to implement this process current VAT and duty legislation within the EU framework can remain in place during this transition period.
In theory, because VAT was only introduced as a result of Britain joining the EEC in 1973, the UK government could abandon the VAT principle altogether. But HMRC are not expected to make immediate changes to general VAT levels even though the current rates are fixed within EU framework levels. If there is significant turmoil within the British economy VAT rate changes could be implemented.
One area where brexit may bring an advantage is in the field of corporation tax. The chancellor has hinted that he may reduce the rate to 15% which will give a welcome boost to businesses.
Anything can happen!
Before the referendum vote took place George Osborne threatened a ‘mini budget’ in the event of a vote to leave. However the government is now in turmoil due to the Prime Minister’s stated intention to step down and we think that new leadership will see the imposition of a new Cabinet and a new Chancellor. No-one can predict what the actions of a new cabinet will be. What you can be sure of is that, whatever happens we will do our best to keep you informed and help you understand what it all means for your finances.
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About Alom Rouf
Alom is an incorporated financial accountant and a qualified practising member of the Institute of Financial Accountants. He has been in the accountancy industry since 2002. Throughout the years, he has gained a vast amount of experience in evaluating sole trader and partnership clients to assess whether they would be better off incorporating.