Boris Johnson is the New PM: How will your finances be affected?
Boris Johnson is the new Prime Minister after winning a decisive victory over Jeremy Hunt in the Tory leadership election.
During his campaign, Johnson made various pledges with regards to personal finance. Providing he makes good on them, how will his premiership affect you?
One of Johnson’s pledges was to sort out the pensions crisis currently overwhelming the NHS.
Senior doctors have reportedly sought to avoid steep tax bills by refusing to take on extra shifts. These extra costs to doctors have been caused by reductions to the tax-free allowance for people earning over £150,000 annually.
Tom Selby, senior analyst at AJ Bell, 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.”
However, Selby is sceptical as to whether these measures will appease senior doctors, and expressed concern about the move “£1bn hole in the Treasury’s coffers which would need to be plugged.”
Income Tax and National Insurance
Johnson plans to create a saving of £2,500 a year to 4 million higher earners, costing a total of £9bn. He will achieve this by increasing the higher-rate tax threshold from £50,000 per year, to £80,000.
“Coincidentally, this is almost exactly the annual salary of Conservative MPs whose votes he needed to get on the final ballot to members,” says Selby. He also explains that Johnson is likely to raise the National Insurance thresholds to fund it all:
“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 plans to invigorate the housing market by halving stamp duty and scrapping stamp duty on homes up to the value of £500,000 altogether.
For first time buyers, this could mean an extra £10,000 in their pockets, whilst other property buyers will potentially see an extra £15,000 in their pockets too.
The change has been welcomed by those in the sector, with Shaun Church, director at Private Finance, explaining that such a move would solve a crucial issue in the property market:
“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.”
Despite experiencing some fluctuations since the announcement of Johnson becoming Prime Minister, the value of the pound is to be largely unaffected as it was generally expected that Johnson would win the vote.
However, Michael Brown, currency expert at Caxton FX, explains that Johnson’s next moves (and stance on Brexit) are likely to be big factors in how sterling will fare:
“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.”