Tax  

What advisers can expect from Liz Truss as prime minister

"If we have to wait for an emergency Budget well into September to find out, it means weeks of desperate worry and uncertainty on top of everything else.”

Corporation tax

Corporation tax policy has been a dividing line in the contest, with Truss ruling out a change in the tax, despite Sunak pledging to increase it from 19 to 25 per cent from 2023 when he was chancellor.

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The 2016 budget announced corporation tax in 2020 will be reduced to 17 per cent, however before the pandemic it was announced that it will be held at 19 per cent. 

Business leaders have hit out at the potential rise, saying it is a tax levied on profits at a time when many companies are facing recession.

Social care levy

Another of Truss's headline policy promises is to scrap the social care levy.

The levy was introduced in April this year to pay for reforms to the UK’s social care system, and is a 1.25 percentage point increase on national insurance.

If left in tact, the tax would raise £12bn a year.

It is currently appearing on payslips as part of employees’ national insurance contributions, with the plan that from April 2023 it will be separated out in a separate line at the same amount.

However, Truss is reportedly considering scrapping the levy as soon as she enters office.  

Head of retirement policy at AJ Bell, Tom Selby, said this “helping hand” will be dwarfed by soaring energy costs over the next few months. 

“The move also calls into question how the planned social care reforms, which include a cap on lifetime costs, will be funded,” he said. 

“While the idea of a hypothecated tax is of course a nonsense in reality – all tax and NI goes into the same pot – Truss will be forced to explain how social care reforms will be funded in light of the decision to scrap the hike.”

Green levy, energy bills

Consumers currently pay around £150 per year per household on environmental and social levies, which Truss has said she will scrap on taking up office.

However, this help will “barely touch the sides” of the high energy prices the UK is set to face this winter, said head of personal finance at AJ Bell, Laura Suter.

“Truss originally said she’d rely on tax cuts to help people through the awful winter ahead, but it now feels inevitable that she’ll have to announce additional support to extend the current cost of living handouts.”

sally.hickey@ft.com