Election Fever – its getting hot in here!

With election fever hotting up and only 3 weeks to go, we take a look at the key tax proposals from each party’s manifesto.

Conservative Party’s Tax Proposals

National Insurance Reduction: The Conservative Party plans to halve employee National Insurance contributions from 12% to 6% by April 2027, with the ultimate goal of eliminating it when economically feasible.

Self-Employed National Insurance: The manifesto proposes abolishing Class 4 National Insurance contributions for the self-employed, simplifying the tax system and benefiting approximately 93% of self-employed individuals.

Tackling Tax Evasion and Avoidance: The Conservatives aim to raise an additional £6 billion annually by targeting tax avoidance and evasion. This includes increasing HMRC staffing, investing in technology, and focusing on areas such as umbrella companies and tax advice regulation.

Inheritance Tax: A shift from a domicile-based to a residence-based system for inheritance tax is planned. This would subject individuals who have been UK residents for 10 years to UK inheritance tax on their worldwide assets.

Temporary Repatriation Facility: A proposed Temporary Repatriation Facility would allow non-doms to bring foreign income and gains into the UK at a flat rate of 12% tax during the 2025/26 or 2026/27 tax years.

These proposals aim to simplify the tax system, boost economic activity, and increase tax revenues to support public services. Their implementation depends on economic conditions and parliamentary approval.

Labour Party’s Tax Proposals

Taxation of High Earners: Labour plans to raise an additional £5 billion annually for health and education by cracking down on tax dodging. This includes boosting compliance, investing in technology, and making legal changes to close the tax gap.

Non-Dom Taxation: Labour supports replacing the non-dom rules with a residence-based system similar to the Conservatives’ proposal. They aim to close perceived loopholes, such as including all foreign assets in inheritance tax and removing a 50% discount on income during the transition.

Investment Incentives: Labour is considering introducing investment incentives during the initial four-year window of the new non-dom rules to encourage UK investment income and discourage moving funds offshore.

Tax Evasion and Avoidance: Like the Conservatives, Labour targets an increase in tax revenues by tackling tax evasion and avoidance, though their specific measures may differ.

Labour’s tax policies emphasise fairness and closing perceived loopholes while generating revenue to fund public services. This approach contrasts with the Conservative focus on reducing tax rates and simplifying the tax system.

These proposals reflect Labour’s stance on tax fairness, economic policy, and funding priorities, aiming to redistribute wealth and ensure equitable contributions to public services.

Liberal Democrats’ Tax Proposals

Taxing Wealth: The Liberal Democrats propose an overhaul of wealth taxation, including higher taxes on income from capital gains and dividends, and reforming inheritance tax to make it fairer.

Income Tax: They plan to introduce a 1% rise in all income tax rates to fund the NHS and social care, targeting higher earners.

Corporate Taxes: The party aims to increase corporate tax rates and implement a “Digital Sales Tax” on large technology firms.

Environmental Taxes: They advocate for green taxes, including a frequent flyer levy and higher taxes on single-use plastics.

Tax Evasion and Avoidance: The Liberal Democrats pledge to increase resources for HMRC to tackle tax evasion and avoidance, aiming to close loopholes and ensure fair tax contributions.

Overall, the Liberal Democrats’ tax policies prioritise wealth redistribution, environmental sustainability, and funding public services through increased taxation, particularly targeting higher-income individuals and corporations. Their emphasis is on fairness and environmental responsibility.

Reform’s Tax Proposal

The Reform Party’s manifesto outlines several key tax implications designed to simplify and reduce the tax burden:

Flat Tax Rate: The Reform Party proposes introducing a flat tax rate of 20% on income, aimed at simplifying the tax system and making it more transparent.

Abolishing Inheritance Tax: They plan to abolish inheritance tax entirely, arguing that it is an unfair tax on the savings and assets people leave to their families.

Reducing Corporation Tax: The manifesto includes a proposal to lower the corporation tax rate to 15%, intending to make the UK more competitive for businesses and encourage investment.

Simplifying VAT: They advocate for simplifying the VAT system by reducing the number of different rates and exemptions, aiming to streamline tax compliance for businesses. They also argue in opposition of Labour and propose they will not charge VAT on private school fees and instead will offer tax relief if you pay for private education.

National Insurance Overhaul: The Reform Party proposes merging National Insurance contributions with income tax to create a single, simpler tax on earnings.

The tax proposals outlined in the Conservative, Labour, Liberal Democrat and Reform manifestos signal significant changes to the UK’s tax landscape. From reductions in National Insurance and tackling tax evasion to fairness and closing loopholes and emphasis on wealth redistribution and environmental sustainability, these changes will impact individuals and businesses alike. Navigating these new tax policies can be complex and challenging.

Next Steps

Whilst the polls indicate that Labour are tipped to win, we know that things can change quickly. Whatever the party in power, it is likely that any tax changes won’t be properly debated and/or introduced until the first post-election budget which will likely take place in the Autumn so there is still time to act decisively if there is anything in any of the manifestos that concerns you.

Whilst it is highly unlikely (although not impossible) that legislation will apply retrospectively, acting now, could be the right thing in certain circumstances and we would be happy to chat through your options. Please do get in touch.