What will Boris Johnson as Prime Minister mean for your money?
Boris Johnson will become Prime Minister of the UK tomorrow after winning the Conservative party leadership contest.
Johnson scored a landslide victory over Jeremy Hunt, winning 66.4 per cent of members’ votes, with Hunt trailing on 33.6 per cent.
Johnson has already made a number of campaign pledges regarding personal finance.
Income tax and National Insurance
Johnson plans to hand a £9bn tax boost to 4 million higher earners by raising the 40p higher-rate tax threshold from £50,000 to £80,000. The move is expected to benefit the top 10 per cent of earners to the tune of almost £2,500 a year.
Tom Selby, senior analyst at AJ Bell, said: “Coincidentally, this is almost exactly the annual salary of Conservative MPs whose votes he needed to get on the final ballot to members.
“Johnson also hinted the National Insurance thresholds could be raised to help pay for the measure. At the same time, he signalled his intention to increase the point at which NI payments kick-in to boost lower earners.”
Johnson has promised to fix the pension tax crisis currently engulfing the NHS. The issue, caused by the tapering of the annual tax-free allowance for people earning more than £150,000, has led to senior doctors refusing shifts to avoid crippling tax bills.
Selby said: “The Department of Health and Social Care yesterday proposed flexibilities in the scheme so GPs and high-earning consultants can opt to pay less into their pension and in turn get lower pensions.
This, it argued, would mean they could reduce or even eliminate the risk of being hit by annual allowance charges.
“This complex fudge is unlikely to appease those affected, however, and while Johnson has not said how he will ‘fix’ the problem, scrapping the taper altogether would be the obvious solution. If Johnson does ditch the taper, however, he would blow a £1bn hole in the Treasury’s coffers which would need to be plugged.”
Johnson is considering scrapping stamp duty on homes up to £500,000 and halving the tax charged on homes over this threshold in a bid to stimulate the housing market.
The proposed stamp duty cut would represent a major giveaway of up to £10,000 for first-time buyers and £15,000 for other property buyers.
Shaun Church, director at Private Finance, said: “For too long stamp duty has stagnated the UK housing market. Last-time buyers in particular remain stuck in homes too large for their needs that are too costly to give up. We’re calling for a last-time buyer exemption to be included as part of Johnson’s stamp duty overhaul, encouraging empty nesters to downsize to homes more suited for their future needs, freeing up crucial housing stock for the wider property ladder.”
Since the announcement that Johnson will be Prime Minister, sterling’s value has rebounded to 1.1156 against the Euro, although it has now dropped down to 1.1142.
However, the pound is still low compared to its pre-EU referendum levels in June 2016. Back then, £1 would get you about €1.4271.
Michael Brown, currency expert at Caxton FX, said: “With such an outcome having been largely expected, sterling’s immediate reaction has been muted as the news was already priced in.
“But focus will quickly switch to the next steps – namely, cabinet appointments and the Brexit plan. The latter will be of more importance for markets, with sterling set to remain under pressure should Boris continue his ‘do or die’ Halloween Brexit stance.”
Inevitably, the immediate focus of the new Prime Minister will be to resolve the Brexit deadlock to ensure a resolution is found.
Research by FairMoney.com, titled Brexit Broke Me, found that Brexit has already had a catastrophic effect on Brits’ personal finances.
A fifth of Brits (10.5 million) believe that since the Brexit vote in June 2016, they are in the worst financial position that they have ever been in. More than half of Brits (53 per cent) said that their average disposable income per week is less than £0.
Dr Roger Gewolb, founder and executive chairman of FairMoney.com, said: “Our research at FairMoney shows quite demonstrably that millions of Britons are in their worst financial situation for years and quite frankly this process has taken valuable time from looking for resolutions to solve the Brexit issue.”