May vows not to increase VAT

May vows not to increase VAT

Theresa May has vowed not to increase VAT, but has not ruled out increases in either income tax or national insurance should the Conservative Party win the upcoming general election.

The Prime Minister has also indicated she may scrap the ‘tax lock’ which promised no increase in any of the three forms of income tax. However, the Labour Party recently promised to not increase VAT, and the Conservatives have now matched this pledge.

Earlier this year, chancellor Philip Hammond was forced to go back on his budget plans to raise national insurance contributions. The initial plan was for the contributions to increase for the self-employed. However, there was uproar on the basis that such an increase was seen as being a direct brake of a Conservative manifesto commitment. Since then, the Prime Minister has been asked multiple times if the ‘tax lock’ would be kept in place as part of this year’s election manifesto.

Theresa May was interviewed on ITV’s Peston on Sunday, and was challenged by Mr Peston on a statement she made last July that the Tory party would focus on the needs of “those who were just about managing.” Peston challenged the Prime Minister on the basis of a number of independent economic assessments, all of which indicate that any future economic difficulties are likely to disproportionately affect the UK’s poorer people.

The Prime Minister also spoke to the BBC’s Andrew Marr, stating that the Conservatives had “absolutely no plans to increase the level of tax” but that she did not want to make “specific proposals on taxes” unless she was sure they could be delivered.

The tax lock has continued to trouble the Chancellor since a backbench Tory revolt forced him to cancel the national insurance increases for the UK’s growing self-employed sector.

The Prime Minister also noted that Britain’s richest citizens were still paying more than their fair share of tax.

“If you look at the percentage of tax that’s being paid by the very richest, the top one percent of people are actually paying a higher percentage of the overall income tax than in any year under the Labour government,” she said.

Uncertainty over future tax rates can substantially impact small businesses. Without knowing how the upcoming general election will affect how much national insurance and general tax they will have to pay, businesses will find it far trickier to manage their ongoing cash flow.

The current PAYE system has already received criticism. Keeping up with the ongoing changes has been tough work for many businesses, and some firms have found it tough to keep up with payments.

This uncertainty and confusion is likely to continue with both parties sure to make further financial pledges ahead of the general election.

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