Election fever – it’s getting hot around here!
As election fever heats up and there are just three weeks to go, we look at the key tax proposals from each party’s manifesto.
The Conservative Party’s tax proposals
National Insurance Reduction: The Conservative Party plans to halve workers’ national insurance contributions, from 12% to 6% by April 2027, with the ultimate aim of scrapping them where economically feasible.
National insurance for self-employed workers: The manifesto proposes to remove class 4 national insurance contributions for the self-employed, simplify the tax system and benefit around 93% of self-employed workers.
Fight against tax evasion and evasion: The Tories aim to raise an extra £6 billion a year by targeting tax avoidance and fraud. This includes increasing HMRC’s headcount, investing in technology and focusing on areas such as umbrella companies and the regulation of tax advice.
Inheritance tax: There are plans to move from a domicile-based inheritance tax system to a residence-based system. This would subject people who have been resident in the UK for 10 years to UK inheritance tax on their worldwide assets.
Temporary repatriation facility: A proposed Temporary Repatriation Facility would allow non-residents to bring foreign income and gains into the UK at a flat rate of 12% tax in tax years 2025/26 or 2026/27.
These proposals aim to simplify the tax system, stimulate economic activity and increase tax revenues to support public services. Their implementation depends on economic conditions and parliamentary approval.
Labor’s tax proposals
Taxation of high incomes: Labor plans to raise an extra £5 billion a year for health and education by cracking down on tax avoidance. This involves strengthening compliance, investing in technology and making legal changes to reduce the tax gap.
Taxation outside the Overseas Territories: Labor supports replacing the no-dom rules with a residence-based system similar to the Tories’ proposal. They aim to close perceived loopholes, such as including all foreign assets in inheritance tax and removing a 50% cut on income during the transition.
Investment incentives: Labor plans to introduce investment incentives during the first four-year period of the new non-dom rules to encourage investment income in the UK and discourage the transfer of funds overseas.
Tax evasion and evasion: Like the Conservatives, Labor aims to increase tax revenue by tackling tax evasion and evasion, although their specific measures may differ.
Labor tax policies emphasize fairness and closing perceived loopholes while generating revenue to fund public services. This approach contrasts with the Conservatives’ emphasis on reducing tax rates and simplifying the tax system.
These proposals reflect Labour’s position on tax fairness, economic policy and funding priorities, aimed at redistributing wealth and ensuring fair contributions to public services.
Tax proposals from the Liberal Democrats
Tax wealth: The Liberal Democrats are proposing an overhaul of wealth taxation, including higher taxes on capital gains income and dividends, and reform of inheritance taxes to make them fairer.
Income tax: They plan to introduce a 1% increase in all income tax rates to fund the NHS and social care, targeting higher earners.
Society taxes: The party aims to raise corporate tax rates and implement a “digital sales tax” for big tech companies.
Environmental taxes: They advocate for green taxes, including a tax for frequent travelers and higher taxes on single-use plastics.
Tax evasion and evasion: The Liberal Democrats are pledging to increase HMRC’s resources to tackle tax evasion and evasion, with the aim of closing loopholes and ensuring fair tax contributions.
Overall, the Liberal Democrats’ tax policies prioritize wealth redistribution, environmental sustainability and funding public services through increased taxation, particularly targeting higher-income individuals and businesses. They emphasize equity and environmental responsibility.
The tax reform proposal
The Reform Party manifesto highlights several key tax implications intended to simplify and reduce the tax burden:
Flat tax rate: The Reform Party proposes to introduce a flat income tax rate of 20%, aiming to simplify the tax system and make it more transparent.
Abolition of inheritance tax: They are considering abolishing the inheritance tax altogether, arguing that it is an unfair tax on the savings and assets that people leave to their families.
Reduce corporate tax: The manifesto includes a proposal to cut the corporation tax rate to 15%, in a bid to make the UK more competitive for business and encourage investment.
Simplify VAT: They advocate for simplifying the VAT system by reducing the number of different rates and exemptions, with the aim of streamlining companies’ tax compliance. They also oppose Labor and propose that they will not charge VAT on private tuition fees and will instead offer tax relief if you pay for private education.
National Insurance Review: The Reform Party proposes merging national insurance contributions with income tax to create a single, simpler income tax.
The tax proposals set out in the Conservative, Labour, Liberal Democrat and Reform programs signal significant changes to the UK’s tax landscape. Whether it’s cuts to national insurance, tackling tax avoidance, fairness, closing loopholes or a focus on wealth redistribution and environmental sustainability, these changes will have a impact on both individuals and businesses. Navigating these new tax policies can be complex and difficult.
Next steps
Even though the polls say Labor is likely to win, we know things can change quickly. Regardless of which party is in power, it is likely that any tax changes will not be truly debated and/or introduced until the first post-election budget which will likely take place in the fall. So there is still time to act decisively if there is anything. in any of the manifestos that concern you.
Although it is very unlikely (but not impossible) that the legislation will apply retrospectively, acting now could be the right thing in some circumstances and we would be happy to discuss your options. Please contact us.
