The Queen's Speech 2015 outlined a programme for working people, social justice and bringing the country together, highlighting ‘a one nation approach, helping working people get on, supporting aspiration… and continue with its long-term plan to provide economic stability’.

The government outlined a 26-bill package with a tax lock for employers and employee tax rates, personal allowance, ongoing welfare cuts, extension of the right to buy, and a reduction in red tape for small business.

There will be in/out EU referendum before the end of 2017, with the government pledging to reform the current EU relationship.

There was a pledge for a British Bill of Rights, to replace the Human Rights Act, which is likely to face strong opposition across parliament. As yet the timing for this new act is unclear as at this stage it is only described as a ‘proposal’. The ambition to create a 24/7 National Health Service was also repeated.

There were also commitments to reduce red tape for small business and introduce a conciliation service for disputes over payments, and the already announced reform of trade unions to protect essential public services against strikes.

Tax lock

The tax lock on NI rates, income tax rates and VAT will be brought in as part of the Finance Bill and National Insurance Contributions Bill, and will ‘ensure there are no rises in income tax rates, VAT rates or national insurance contributions (NICs) rates for individuals, employees and employers.

It will also include legislation to ensure that the NICs upper earnings limit (the point at which the employee NICs rate reduces to 2%) is no higher than the income tax higher rate threshold (the point at which income tax increases to 40%).

At the same time, there will be no extension to the current scope of VAT.

Prime minister David Cameron said: ‘As part of our long-term plan to back working people and make work pay, the government is determined to reward work by letting people keep even more of the money they earn. The government has already committed to raising the income tax personal allowance to £12,500 by 2020.

‘Today the government is going further in its actions to offer more security to working people by confirming that legislation will be brought forward to ensure that future increases to the income tax personal allowance reflect changes to the national minimum wage.

‘This will mean that people working 30 hours a week on the minimum wage will not pay any income tax.’

While the concept of a tax lock garners publicity, this still leaves room for the government to tweak allowances and raise taxes in other ways.

Tom Elliott, private clients partner at Crowe Clark Whitehill said: ‘The tax lock was announced as expected. Whilst holding the rates sounds like good news, there is still room to increase the tax take by restricting allowances (for example, higher rate tax relief on pension contributions).

‘Also, there is no guarantee on the rate of CGT or IHT – whilst there was a pre-election promise to increase the IHT threshold for “family homes”, no mention was made in the speech – perhaps there is more to come on 8 July [Summer Budget]?’

Scotland

On devolution, the Scotland Bill reinforces the powers already set out in the Smith Commission but does not point to any further tax raising powers although the Scottish government will be responsible for raising around 40% of Scotland’s taxes and deciding around 60% of its public spending.

It clarifies the following on tax powers:

• Enable the Scottish parliament to set the thresholds and rates of income tax on earnings in Scotland and keep all the money raised in Scotland;
• Provide the Scottish parliament with the first ten percentage points of standard rate VAT revenue raised in Scotland (and 2.5% reduced rate).
• Devolve responsibility for Air Passenger Duty and aggregates levy.

ACCA head of taxation Chas Roy Chowdhury said: ‘From a tax point of view, plans for powers to be handed to the Scottish parliament by the end of the summer need to be clearly explained and an agreed timetable set in place.

‘Scotland’s ability to set its own rates and bands of income tax, to spend half of the tax collected via VAT and to set levels of housing benefit are significant power shifts where clarity is needed about HMRC’s part in this.

‘HMRC will require significant investment to ensure it can robustly manage such important work with the increasing plans to to tackle unacceptable tax avoidance and tax evasion. HMRC is under pressure, and considering they play such a vital role in tax stability, we would like to hear more about plans for HMRC’s future, especially in a devolved environment.’

Business

On the business front, the Enterprise Bill will include measures to:

• Create a Small Business Conciliation Service to help resolve business-to-business disputes, especially over late payment, to minimise the need for court action; and
• Improving the business rates system ahead of the 2017 revaluation, including modernising the appeals system;
• Capping public sector redundancy pay - introducing a cap on exit payments made to public sector workers to end six figure payoffs for the best paid public sector workers.

Commenting on the Enterprise Bill, Mark Tighe, managing director of capital allowances specialists Catax Solutions, said: ‘The Queen's speech is always a key indicator in the government's intentions for the next five years but the fact that the Enterprise Bill's emphasis is on job creation is a disappointment with no clarification going forward on the tax relief regulation for UK businesses.

‘UK businesses will allow the government to bed in, however, the Autumn Statement will be D-Day for the government to put its promises into practice, as they will need clear direction to develop and grow and truly become the engines of the UK economy.’

In addition, the Childcare Bill will grant working parents 30 hours free childcare a week for three and four year olds, and reforms will be introduced so that childcare will get proper tax relief.

The government has a small 12-seat majority and could face fierce opposition from the House of Lords where there is a 100-strong group of Liberal Democrat peers, as well as Labour opposition, which could see various amendments and delays to some key measures.

The Queen's Speech and 103-page supporting document is available here