In today’s Budget, Chancellor George Osborne confirmed the government is to legislate for a ‘tax lock’, setting a ceiling for the main rates of income tax, the standard and reduced rates of VAT, and employer and employee (Class 1) NICs rates, ensuring that they cannot rise above their current (2015-16) levels
This means that the basic, higher and additional rates of income tax will not increase above 20%, 40% and 45% for the next five years.
The tax lock will also ensure that the NICs upper earnings limit (UEL) for Class 1 contributions, currently £815 per week, cannot rise above the income tax higher rate threshold.
In addition, the proposed legislation will prevent the relevant statutory provisions being used to remove any items from the zero rate of VAT and reduced rate of VAT for the duration of this parliament.
As previously indicated in Osborne’s final Budget of the coalition government earlier this year, the government is to increase the income tax personal allowance from £10,600 in 2015-16 to £11,000 in 2016-17. It will increase to £11,200 from 2017-18.
The government will also increase the higher rate threshold from £42,385 in 2015-16 to £43,000 in 2016-17 and to £43,600 in 2017-18. The NICs upper earnings limit will also increase to remain aligned with the higher rate threshold.
The triple lock means for the duration of this parliament, the standard rate of VAT under section 2 of VATA can be no higher than 20% and that the reduced rate under section 29A can be no higher than 5%. The zero rate cannot be more than 0% and therefore this is not covered by the legislation.
