Tax Developments from UK Political Party Manifestos: A Round-Up

Last week, several political parties released their manifestos, detailing their tax policies and economic plans for the upcoming election. Here, we provide an overview of the key tax proposals from the Conservative Party, Labour Party, Liberal Democrats, and Green Party, highlighting their potential implications for individuals and businesses.

Conservative Party

The Conservatives have announced £17 billion in tax cuts, funded by reductions in welfare benefits and efforts to close the tax gap. Key proposals include:

• National Insurance (NI) Reductions: An additional 2% cut in NI for employees by 2027 and the abolition of NI for most self-employed individuals.
• Personal Allowance for Pensioners: Introduction of a new age-related personal allowance to increase the tax-free threshold.
• Stamp Duty Relief: Elimination of stamp duty on properties up to £425,000 for first-time buyers.
• Capital Gains Tax (CGT) Exemptions: A two-year CGT exemption for landlords selling residential properties to their tenants.
• Tax Avoidance Measures: Raising at least £6 billion annually through stricter tax avoidance and evasion measures.

The Conservatives have pledged not to increase income tax, VAT, or corporation tax rates. Critics argue that these tax cuts rely on uncertain savings and may impact public services. You could be forgiven for thinking there is nothing new here and perhaps they could have gone further as a last roll of the dice.

Labour Party

Labour’s manifesto focuses on generating £8.6 billion in extra tax revenue to fund public services. Their key tax measures include:

• Non-Dom Tax: Expected to raise £5.23 billion by tightening non-dom tax rules and reducing tax avoidance.
• Private Schools and Business Rates: Applying VAT and business rates to private schools, estimated to raise £1.51 billion.
• Windfall Tax on Oil and Gas: Imposing a windfall tax on oil and gas companies to raise £1.2 billion.
• Property Tax for Non-Residents: Increasing stamp duty by 1% on residential property purchases by non-UK residents.

Labour commits to maintaining current rates of income tax, NI, corporation tax, and VAT. They also plan to modernise HMRC and enhance its capabilities to improve tax compliance and reduce avoidance. Since then there have been a number of reports on the taxes rises that were not included in the manifesto.  These are reported to include increases in Capital Gains Tax on private homes, taxing company pension contributions and sweeping increases in Inheritance tax.

Liberal Democrats

The Liberal Democrats aim to raise nearly £27 billion in extra tax revenue by the end of the next Parliament. Key proposals include:

• Capital Gains Tax Reforms: Adjusting CGT rates and exemptions to raise £5.21 billion.
• Banking Sector Taxes: Restoring the bank surcharge and levy to 2016 levels, expected to generate £4.25 billion.
• Green and Digital Taxes: Increasing the Digital Services Tax to 6% and introducing an energy profits levy without investment allowances.
• Tax Avoidance Crackdown: Measures to tackle tax avoidance and evasion, anticipated to raise £7.23 billion.

Additional proposals include abolishing business rates in favour of a Commercial Landowner Levy and introducing new employment statuses to ensure fair treatment for self-employed individuals.

Green Party

The Green Party’s manifesto emphasises higher taxes on wealth, carbon emissions, and high earners, with the aim of raising £172 billion annually by 2029-30. Key proposals include:

• Wealth Tax: Implementing a 1% tax on assets above £10 million and 2% on assets above £1 billion.
• Carbon Tax: Introducing a carbon tax starting at £120 per tonne of carbon, potentially raising £80 billion annually.
• Removing NI Upper Earnings Limit: Ensuring high earners pay the same NI rate on all income.
• Reforming Inheritance Tax: Making intergenerational wealth transfers more equitable.

The Greens also propose significant investments in green energy and public services, funded by these new tax measures.

Plaid Cymru

Plaid Cymru advocates for increased funding for Wales, including a £20 rise in child benefits. Their manifesto emphasises higher windfall taxes on energy companies and greater control over natural resources and policing powers for Wales.

Reform UK

Reform UK proposes abolishing inheritance tax for estates worth less than £2 million, reducing the tax rate to 20%, and raising the personal allowance threshold to £20,000. Raising the VAT threshold to £150,000 and making the first £100,000 of company profits free from corporation tax is also another interesting pledge. These measures are aimed at reducing the tax burden and attract business to the UK but some have criticised the potential fiscal impact.

Scottish Greens

The Scottish Greens propose higher taxes for the “super wealthy” and the fossil fuel industry. They emphasise the need for significant tax reforms to fund public services and address environmental concerns.

Stay informed and engaged

As the election approaches, understanding the tax implications of each party’s manifesto is crucial for financial planning and business strategy. Each party’s proposals reflect their broader economic priorities and offer distinct approaches to taxation and public spending.

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