Press Room


18 Jun 2024

How Taxing are the Manifestos? – Bradley Phillips




How Taxing are the Manifestos?

The main political parties have now published their General Election 2024 Manifestos.  If you were to vote purely on the basis of a party’s tax proposals, how would you vote?

We summarise below the various tax proposals set out in the Manifestos.

The Conservatives

The Conservatives propose to keep cutting National Insurance, committing to reducing employee NICs by a further 2% to 6% by April 2027.  They also plan to abolish NICs for the self-employed by the end of the next Parliament.

They have also pledged in their Manifesto to not raise the rate of income tax or VAT and to abolish stamp duty for first-time buyers.  The Conservatives also propose a two-year temporary CGT relief for landlords who sell to their existing tenants.

As part of their new “Triple Lock Plus” for pensioners, they propose from next year to raise the tax-free personal allowances for pensioners so that the new State Pension is always below the tax-free threshold and under the proposed new “Pensions Tax Guarantee”, the Conservatives will not introduce any new taxes on pensions and maintain both the 25% tax-free lump sum and tax relief on pension contributions at the marginal rate.

It is assumed that the Spring Budget measures would be resurrected in a new Conservative-led Parliament including the enactment of the abolition of the non-dom remittance tax regime and introduction of a residence-based regime and the proposed new Foreign Income and Gains four years exemption for persons coming to the UK.  It is also assumed the Conservatives would not change the current 25% rate of corporation tax.

In total, the Conservatives claim that they will be cutting taxes by £17.2bn.  They also plan to increase public spending by around £800m.  They intend to pay for that by cutting welfare spending and raising an extra £6.7bn from tackling tax avoidance.

The Conservatives are campaigning on the basis they are the party of tax cuts and Labour are the party of tax rises.  It is interesting to note that even after the proposed Conservative tax cuts, it is predicted by economic commentators that the overall tax burden (as a percentage of GDP) will continue to increase.

Labour

Labour’s Manifesto “Fiscal Plan” includes raising some £5.2bn in revenue from abolishing completely the non-domicile tax rules and investment in reducing tax avoidance.

The Conservative proposals to replace the current non-dom regime with a residence-based regime is broadly supported by Labour subject to closing what it maintains are “loopholes” in the Conservative proposals.

The Manifesto also claims that Labour will be able to raise some £1.5bn from applying VAT and business rates to private schools, a policy which they have talked about for a while.

Labour also confirm in the Manifesto that they will close the carried interest “tax loophole” so that performance-related carried interest returns for asset managers is taxed as income.  They state that this will raise some £565m.

Labour also propose to increase stamp duty on purchases of residential property by non-UK residents by 1% to raise £40m.

In total, all these tax changes are estimated to raise some £7.35bn to be used in part to fund their various additional spending policies.  In addition, as part of their “Green Prosperity Plan”,  Labour also propose a windfall tax on what they call oil and gas giants to raise a further £1.2bn.

Labour state that they will cap corporation tax at the current 25% for the next parliament and that they will retain a permanent full expensing system for capital investment and the annual investment allowance for small business.

The Labour Manifesto also includes a commitment that Labour will not increase taxes on working people so that they will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.  It is not clear what exactly is meant by the term ‘working people’ and the door is left open for raises in capital gains tax.

The Liberal Democrats

The Liberal Democrats propose, when the public finances allow, to cut income tax by raising the income tax personal allowance.

They wish to make the tax system fairer and raise the money needed for their investment plans by cracking down on tax evasion and avoidance and also by implementing a detailed list of measures:

  • reversing Conservative tax cuts for the big banks, restoring Bank Surcharge and Bank Levy revenues to 2016 levels in real terms;
  • imposing a proper, one-off windfall tax on the super-profits of oil and gas producers and traders;
  • increasing the Digital Services Tax on social media firms and other tech giants from 2% to 6%;
  • fairly reforming capital gains tax to close loopholes exploited by the super wealthy; and
  • introducing a 4% tax on the share buyback schemes of FTSE-100 listed companies.

In total, the Liberal Democrats claim their package of tax rises will raise £27bn in 2028-29.

The Liberal Democrat Manifesto also states that they will work with partners in international forums, including the OECD and the UN, to tackle international corporate tax avoidance for the benefit of all countries and make the case for increasing the global minimum rate of corporation tax to 21%.

Interestingly, the Liberal Democrats propose to end retrospective tax changes such as the loan charge brought in by the Conservatives, and to review the Government’s off-payroll working IR35 reforms to ensure self-employed people are treated fairly.

Other Parties

In relation to other choices at the General Election, the Green Party clearly wins the contest for tax rises.  They propose to raise taxes to generate additional revenue of between £50 and £70bn per year by, in addition to tackling tax avoidance, introducing an annual wealth tax (at 1% on assets above £10m and at 2% on assets above £1bn), aligning CGT rates with income tax rates, aligning the tax rates on investment income with the tax and NIC rates on employment income and removing the NIC Upper Earnings Limit. They also mention increasing the rate of the windfall tax on oil and gas production, possibly introducing new windfall taxes on banks when excessive profits are being made, changing the VAT treatment for private education and reducing pension tax relief to the basic rate of income tax.  They also refer to reforming Inheritance Tax.

The Greens also propose to raise an additional staggering £80bn by the end of the next Parliament through a carbon tax.

In contrast, the Reform UK Party are all about cutting taxes.  They propose to increase the income tax personal allowance so that income tax is only paid if earning more than £20,000 and to increase the higher rate threshold to £70,000.  They also propose to cut energy taxes including scrapping VAT on energy bills and lowering fuel duty.  In addition, they wish to abolish IHT for all estates below £2m and reduce IHT for estates above £2m to 20% and to cut residential stamp duty rates.

Conclusion

Finally, to end on a lighter note, we note that Count Binface, who is running against Prime Minister Rishi Sunak in his Richmond and Northallerton constituency, has not, to our knowledge, published any formal tax proposals yet but we hope the Count is not offended if we were to assume they would no doubt likely be considered by some as rubbish whatever they are.

The view from lawyers is that manifesto commitments do not have any formal legal status and cannot be enforced so you may take the view that they should all end up in a bin!

If you would like to discuss, please do not hesitate to contact one of us or your usual Andersen contact.

Happy voting!

Bradley Phillips

 

Bradley Phillips

Director

T: +44 (0)7785 254 944
E: bradley.phillips@uk.Andersen.com

 

Miles Dean

Partner, Head of International Tax

T: +44 (0)7785 770 431
Emiles.dean@uk.Andersen.com

 

Andrew Parkes

National Technical Director

T: +44 (0)7522 229 589
Eandrew.parkes@uk.Andersen.com

Andersen LLP, 2 George Yard, London, EC3V 9DH

Tel: +44 (0)20 7242 5000  |  Fax: +44 (0)20 7282 4337

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The content of this newsletter and any subsequent updates we send do not constitute tax or legal advice and should not be acted upon as such. Specific tax and / or legal advice should be taken before acting on any of the topics covered.

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