With just over two weeks to go until we head to the polls on 4 July, most of the parties have now unveiled their general election manifestos.

Here, we take a deep dive into these documents to compare the parties’ tax plans and how they might impact you…

Conservatives

  • National Insurance: the Conservatives’ long-term ambition is to keep cutting National Insurance “until it’s gone”. However, they add the caveat, “when it’s affordable to do so”. They plan to cut employee National Insurance contributions (NICs) to 6% by April 2027 – and to abolish it entirely by the end of the next Parliament.
  • Income tax: they’ve ruled out raising the rate of income tax.
  • VAT: they’ve vowed not to increase VAT. Plus, they want to explore options to “smooth the cliff edge” at £90,000.
  • Capital gains tax: they’ve said they won’t increase capital gains tax (CGT).
  • Corporation tax: they’ve also pledged not to raise corporation tax.
  • Pensions: the party has promised to introduce the ‘Triple Lock Plus’. Under the plans, they’ll continue to uprate the State Pension in line with the highest of prices, earnings or 2.5%. And they’ll ensure that from next year, the tax-free personal allowance for pensioners also rises by the highest of prices, earnings or 2.5%. Under their ‘Pensions Tax Guarantee’, they’ve pledged not to introduce any new taxes on pensions.
  • Tax avoidance: the Conservatives plan to raise at least a further £6 billion a year from tackling tax avoidance and evasion by the end of the Parliament.
  • Tax incentives: they plan to keep hold of key tax incentives, including the Enterprise Investment Scheme, Seed Enterprise Investment Scheme, Venture Capital Trusts, Business Asset Disposal Relief, Agricultural Property Relief and Business Relief.
  • Inheritance tax: we couldn’t find any mention of IHT in their manifesto.
  • Non-dom tax: no mention of this either.

Labour

  • Business tax: Labour plans to publish a roadmap for business taxation for the next Parliament.
  • Corporation tax: they’ve pledged to cap corporation tax at the current level of 25% for the entire Parliament. And they’ve vowed to act if tax changes in other countries pose a risk to UK competitiveness.
  • National Insurance: they’ve said they won’t increase National Insurance.
  • Income tax: they’ve ruled out raising the basic, higher, or additional rates of Income Tax.
  • VAT: they’ve also promised not to increase VAT. However, they plan to end the VAT exemption and business rates relief for private schools.
  • Non-dom tax: they plan to abolish non-dom status, replacing it with a modern scheme for people “genuinely in the country for a short period”.
  • Offshore trusts: they’ve pledged to end the use of offshore trusts to avoid inheritance tax.
  • Stamp duty: they want to increase the rate of the stamp duty surcharge paid by non-UK residents.
  • Windfall tax: they’ve vowed to close the loopholes in the windfall tax on oil and gas companies.
  • Tax avoidance: they plan to “modernise” HMRC and change the law to tackle tax avoidance.

Liberal Democrats

  • Income tax: the Lib Dems plan to cut income tax by raising the tax-free personal allowance, “when the public finances allow”.
  • Capital gains tax: they want to fairly reform CGT to “close loopholes exploited by the super wealthy”.
  • IR35: they’ve pledged to review the off-payroll working (IR35) reforms.
  • Tax avoidance: the party plans to work with partners in international forums to tackle international corporate tax avoidance and make the case for increasing the global minimum rate of corporation tax to 21%.
  • Digital services tax: they want to increase the digital services tax on social media firms and other tech giants from 2% to 6%.
  • Share buyback scheme: they intend to introduce a 4% tax on the share buyback schemes of FTSE-100 listed companies.

Reform UK

  • Income tax: Reform UK has vowed to lift the income tax start point to £20,000 per year. They want the basic tax rate to stay at 20% and the higher rate to begin at £70,000.
  • Stamp duty: they plan to cut stamp duty to 0% below £750k, and to cut it to 2% from £750k-£1.5m and to 4% over £1.5m.
  • Inheritance tax: the party has pledged to abolish IHT for all estates under £2m. And they want the rate above £2m to be 20% tax, with the option to donate to charity instead.
  • Corporation tax: they intend to lift the minimum profit threshold to £100k, and to reduce the main corporation tax rate from 25% to 20%, then to 15% from Year 3.
  • IR35: the party has vowed to end the IR35 rules.
  • VAT: they want to lift the VAT threshold to £150,000.
  • Online delivery tax: large, multinational enterprises would be charged a 4% online delivery tax.
  • Entrepreneurs’ tax: they plan to cut this to 5%.
  • Private healthcare: the party wants tax relief of 20% on all private healthcare and insurance.
  • Marriage tax allowance: they intend to introduce a UK 25% transferable marriage tax allowance, “as soon as finances allow”.

The Green Party

  • Wealth tax: they want a wealth tax of 1% annually on assets above £10 million and of 2% on assets above £1bn.
  • Capital gains tax: they’re calling for reform of CGT to align the rates paid by taxpayers on income and taxable gains.
  • Investment income: the Green Party wants to see the tax rates on investment income aligned with the tax and National Insurance rates on employment income.
  • National Insurance: they’re calling for the removal of the upper earnings limit that restricts the amount of National Insurance paid by high earners.
  • Carbon tax: they want to introduce a carbon tax on all fossil fuel imports and domestic extraction, based on greenhouse gas emissions produced when fuel is burned.

Other parties

  • In Wales, Plaid Cymru wants the Senedd to have powers to set income tax bands and thresholds. At a UK level, the party wants to see the balance of the tax burden fall on those individuals and corporations with the broadest shoulders. They also want: to equalise capital gains tax with income tax; to investigate increasing higher earners’ NICs; to support introducing a wealth tax; to crackdown on tax evasion and avoidance; and to abolish loopholes for non-doms. And they’re calling for: energy companies to be subject to an increased windfall tax; and for the cap on bankers’ bonuses to be reintroduced.
  • The Scottish National Party (SNP) has yet to publish its manifesto. But their plans we know about so far include: opposing any proposed increase in National Insurance or VAT; a plan to explore the possibility of levying a higher poundage on properties where the owner is registered in a tax haven; and an aim to maintain current income tax rates for the duration of the Parliament and increase thresholds by a maximum of inflation. And the party is calling on the UK government to take “much tougher action on tax avoidance”.

Our thoughts on the general election manifestos

Voters are understandably a little sceptical when it comes to party manifestos. Whoever inherits the current economy will have constraints on what they’re able to do in terms of revenue versus spending. There are some interesting suggestions in the manifestos but ultimately every party will be restricted in any tax cuts they can make, unless they also make a significant reduction in spending or increase in borrowing.

Crackdown on tax avoidance and tax evasion

Whatever happens in the general election, we know HMRC will continue its clampdown on tax avoidance and tax evasion.

This isn’t contentious if we’re talking about high-level, scheme-based avoidance (tax evasion is illegal and therefore any party will strive to combat evasion – no matter how difficult a challenge that might be).

The issue with tax avoidance is how “avoidance” is defined and we won’t know the answer to that until the next government tells us. This creates uncertainty and can sometimes result in taxpayers acting impulsively, and even uncommercially, to create their own certainty. Such behaviour isn’t always in the taxpayer’s best interests and often won’t achieve the desired outcome.

Our advice for taxpayers

You should consider whether there are any changes you can make ahead of the election to ease your uncertainty. In other words, what changes are you likely to be making anyway and can you potentially bring them forward?

However, we wouldn’t recommend that you make drastic, unnecessary changes, simply to avoid a problem that may or may not be lurking in the future.

You should ensure any changes meet your objectives and aren’t simply a reaction to what a future government may or may not do.

There’s no issue with organising your affairs as tax efficiently as you can, within the rules. But we’d always caution against making changes simply because tax rules may change in the future.

Plain-English UK tax advice

Contact our team of specialist tax advisers to discuss how the general election might impact you. Call us today on 07813 434195 or email stephanie.churchill@churchilltaxation.co.uk

Steph Churchill

Stephanie Churchill

Managing director & co-owner of Churchill Taxation