NHS funding to come from tax?
The government confirmed this week they will increase funding to the NHS over a five year plan ending with an additional £20bn a year by 2023. However, the obvious question is where is the money going to come from? The government says a combination of economic growth, a "Brexit dividend" and tax rises is the answer.
The Brexit dividend is the annual contribution the UK pays each year to the EU. In March 2019 when the UK leaves the EU these costs will be reduced although it is likely the UK will still be paying some contributions as part of the leave transition period and paying additional costs as will no longer have EU benefits. If it is the case that NHS funding cannot be covered by the Brexit dividend then the government wilLlllll look to taxes as the solution.
The chancellor Philip Hammond has said that any tax increases will be done in a "fair and balanced way" but has acknowledged there will be increases, going against conservative manifesto promises.
The government had planned to further reduce corporation tax payable by businesses from 19% to 17% by 2020, to increase the individuals’ non-taxable income (personal allowance) to £12,500 a year by 2020 and to up the higher rate income tax threshold to £50,000 (currently £45,000). But it has been suggested these plans could be reversed given the need for funding for the NHS. It is expected the Autumn Budget given in November will shed some light on which taxes are set to increase.
Top tip Be aware of possible tax changes and plan accordingly.
For tax advice please contact Graeme Perry, Head of UK and Cross Border Tax.