The main UK political parties have published their general election manifestos, with a variety of tax announcements included (sometimes hidden) in the detail. Some of the more eye-catching points from the Liberal Democrat and Conservative tax plans are highlighted below. Other manifesto proposals will be covered next week (the Labour Party manifesto was expected to be published on 13 June).
The main thrust of the party’s approach to tax appears to be to ‘reverse’ the direction of travel set by the current government in recent years. Measures would include increasing tax on the ‘big banks’ – raising the bank surcharge (which had been reduced from 1 April 2023 in recognition of the more or less corresponding increase in the main rate of corporation tax) and perhaps also looking at the surcharge allowance, ‘restoring bank surcharge and bank levy revenues to 2016 levels in real terms’. The party would also impose what it calls a ‘proper’ one-off windfall tax on the energy companies.
Interestingly, the manifesto also commits to working internationally towards increasing the Pillar Two global minimum corporate tax rate to 21%. The party would also increase the rate of digital services tax from 2% to 6%, although the manifesto fails to mention the difficulties a continued commitment to unilateral digital services taxes would present to international collaborative efforts on Pillar One.
On personal tax, the party would, ‘when the public finances allow’ increase the personal allowance (although it is not clear whether this means the change would happen before the current freeze is due to expire on 5 April 2028). There is also no mention of the income tax bands. A somewhat opaque commitment on CGT would see reforms ‘to close loopholes exploited by the super wealthy’.
The party would also introduce a new 4% tax on share buybacks for FTSE-100 companies, which it estimates would raise at least £1.4bn a year but which Tax Policy Associates (TPA) contends could actually raise ‘almost nothing’. This is a policy framed around the US 1% tax on share buybacks which, given the tax and corporate framework in the US, results in a more favourable overall tax position where value is returned to shareholders via buybacks as opposed to dividends. TPA suggests that, in the UK, companies would reasonably be expected to simply pay dividends rather than buying back shares in order to avoid the charge. The Institute for Fiscal Studies has also expressed reservations, noting that ‘it would distort companies’ financing decisions and further discourage the use of equity finance relative to debt finance’.
Other proposed measures include:
In line with the other main parties, the Lib Dems would commit to the pensions triple lock (so that pensions rise in line with the highest of inflation, wages or 2.5%). All the main parties are relying on increased tax receipts from further measures to tackle tax avoidance and/or evasion. The Lib Dems say that they would give HMRC ‘the resources it needs to properly tackle tax avoidance and evasion’.
Finally, and perhaps something of interest for prospective future Treasury ministers: the party would ‘pass a comprehensive “Anti-SLAPP Law” to provide robust protection for free speech, whistleblowers and media scrutiny against Strategic Lawsuits Against Public Participation’.
The party has hit the headlines with several personal tax and pension announcements, but its section on ‘a competitive tax system’ will be of particular interest to practitioners. The manifesto sets out the aspiration to extend full expensing to leasing (when finances allow) and commits to no raise in corporation tax. For SMEs, there is a 10-point support plan which includes exploring options to smooth the cliff-edge effect of the VAT registration threshold, retaining some of the existing tax incentives including the venture capital schemes and business asset disposal relief – alongside a commitment not to increase capital gains tax. The manifesto also commits to maintaining the existing R&D tax reliefs and ensuring that the creative sector reliefs ‘remain competitive’.
Strangely, perhaps, the manifesto notes that the Conservatives introduced the ‘biggest business tax cut in modern British history’ without acknowledging the decision to then increase the main rate of corporation tax to 25% up from that record 19% low.
The headline proposal on personal tax is to implement a further two percentage point cut in NICs for employees, taking the rate of primary Class 1 contributions to 6% ‘by April 2027’, and to abolish the main rate of Class 4 NICs for the self-employed ‘by the end of the next Parliament’. Presumably the 2% rate would continue to apply for earnings above the upper earnings limit for Class 4.
On CGT, the party would introduce a new two-year temporary relief for landlords who sell to their existing tenants. The IFS has pointed out that this would effectively encourage tenants to buy the property they are living in rather than another that might be more suitable and would incentivise landlords to sell within the two-year window. In particular, the incentive to sell would be stronger for properties which had appreciated most in value and could, as pointed out by Tax Policy Associates, be open to abuse. ‘In our view this is a gimmick which will benefit very few people and could badly backfire’, says TPA.
The Conservatives have also committed to ending the freeze in the personal allowance for those at or above state pension age, in effect restoring an age-related personal allowance. The ‘triple lock plus’ policy would guarantee that both the state pension and the new age-related personal allowance would increase by the highest of inflation, earnings or 2.5%. Fact checking organisation Full Fact has pointed out that the full new state pension is £11,502, below the (frozen) current standard personal allowance of £12,570. While the manifesto describes the policy as a ‘tax cut for pensioners’ avoiding the new state pension getting ‘dragged into income tax’ it does not appear to address the issue of fiscal drag on the rest of the taxpaying population, which would continue to be government policy.
The party would double the high income child benefit charge income threshold to £120,000, with the withdrawal taper operating up to £160,000, and this would apply on a household basis rather than by reference to the highest earner. LITRG raises the potential extra complexity of tracking income on a household basis and the IFS highlights a missed opportunity to return to a time when the benefit was universal, and somewhat simpler.
First-time buyer relief from stamp duty land tax would be made permanent (up to a £425,000 threshold), and the party commits to no major changes to council tax (including no revaluation exercises).
The Conservatives also aim to raise ‘at least a further £6 billion a year from tackling tax avoidance and evasion by the end of the Parliament’.
Commenting on the manifesto, Stuart Adam, Senior Economist at the IFS, highlights a number of areas where there is now a commitment not to make ‘essential and urgent reforms’ including a council tax revaluation in England (with the existing bands now 33 years out of date), or a long-term plan to replace revenue from road fuel duty as electric cars replace petrol and diesel. As Adam notes: ‘It is perfectly reasonable for a party to want to cut taxes rather than increase them. But the pledges in this manifesto would also rule out vast swathes of sensible structural reform of the tax system.’
The main UK political parties have published their general election manifestos, with a variety of tax announcements included (sometimes hidden) in the detail. Some of the more eye-catching points from the Liberal Democrat and Conservative tax plans are highlighted below. Other manifesto proposals will be covered next week (the Labour Party manifesto was expected to be published on 13 June).
The main thrust of the party’s approach to tax appears to be to ‘reverse’ the direction of travel set by the current government in recent years. Measures would include increasing tax on the ‘big banks’ – raising the bank surcharge (which had been reduced from 1 April 2023 in recognition of the more or less corresponding increase in the main rate of corporation tax) and perhaps also looking at the surcharge allowance, ‘restoring bank surcharge and bank levy revenues to 2016 levels in real terms’. The party would also impose what it calls a ‘proper’ one-off windfall tax on the energy companies.
Interestingly, the manifesto also commits to working internationally towards increasing the Pillar Two global minimum corporate tax rate to 21%. The party would also increase the rate of digital services tax from 2% to 6%, although the manifesto fails to mention the difficulties a continued commitment to unilateral digital services taxes would present to international collaborative efforts on Pillar One.
On personal tax, the party would, ‘when the public finances allow’ increase the personal allowance (although it is not clear whether this means the change would happen before the current freeze is due to expire on 5 April 2028). There is also no mention of the income tax bands. A somewhat opaque commitment on CGT would see reforms ‘to close loopholes exploited by the super wealthy’.
The party would also introduce a new 4% tax on share buybacks for FTSE-100 companies, which it estimates would raise at least £1.4bn a year but which Tax Policy Associates (TPA) contends could actually raise ‘almost nothing’. This is a policy framed around the US 1% tax on share buybacks which, given the tax and corporate framework in the US, results in a more favourable overall tax position where value is returned to shareholders via buybacks as opposed to dividends. TPA suggests that, in the UK, companies would reasonably be expected to simply pay dividends rather than buying back shares in order to avoid the charge. The Institute for Fiscal Studies has also expressed reservations, noting that ‘it would distort companies’ financing decisions and further discourage the use of equity finance relative to debt finance’.
Other proposed measures include:
In line with the other main parties, the Lib Dems would commit to the pensions triple lock (so that pensions rise in line with the highest of inflation, wages or 2.5%). All the main parties are relying on increased tax receipts from further measures to tackle tax avoidance and/or evasion. The Lib Dems say that they would give HMRC ‘the resources it needs to properly tackle tax avoidance and evasion’.
Finally, and perhaps something of interest for prospective future Treasury ministers: the party would ‘pass a comprehensive “Anti-SLAPP Law” to provide robust protection for free speech, whistleblowers and media scrutiny against Strategic Lawsuits Against Public Participation’.
The party has hit the headlines with several personal tax and pension announcements, but its section on ‘a competitive tax system’ will be of particular interest to practitioners. The manifesto sets out the aspiration to extend full expensing to leasing (when finances allow) and commits to no raise in corporation tax. For SMEs, there is a 10-point support plan which includes exploring options to smooth the cliff-edge effect of the VAT registration threshold, retaining some of the existing tax incentives including the venture capital schemes and business asset disposal relief – alongside a commitment not to increase capital gains tax. The manifesto also commits to maintaining the existing R&D tax reliefs and ensuring that the creative sector reliefs ‘remain competitive’.
Strangely, perhaps, the manifesto notes that the Conservatives introduced the ‘biggest business tax cut in modern British history’ without acknowledging the decision to then increase the main rate of corporation tax to 25% up from that record 19% low.
The headline proposal on personal tax is to implement a further two percentage point cut in NICs for employees, taking the rate of primary Class 1 contributions to 6% ‘by April 2027’, and to abolish the main rate of Class 4 NICs for the self-employed ‘by the end of the next Parliament’. Presumably the 2% rate would continue to apply for earnings above the upper earnings limit for Class 4.
On CGT, the party would introduce a new two-year temporary relief for landlords who sell to their existing tenants. The IFS has pointed out that this would effectively encourage tenants to buy the property they are living in rather than another that might be more suitable and would incentivise landlords to sell within the two-year window. In particular, the incentive to sell would be stronger for properties which had appreciated most in value and could, as pointed out by Tax Policy Associates, be open to abuse. ‘In our view this is a gimmick which will benefit very few people and could badly backfire’, says TPA.
The Conservatives have also committed to ending the freeze in the personal allowance for those at or above state pension age, in effect restoring an age-related personal allowance. The ‘triple lock plus’ policy would guarantee that both the state pension and the new age-related personal allowance would increase by the highest of inflation, earnings or 2.5%. Fact checking organisation Full Fact has pointed out that the full new state pension is £11,502, below the (frozen) current standard personal allowance of £12,570. While the manifesto describes the policy as a ‘tax cut for pensioners’ avoiding the new state pension getting ‘dragged into income tax’ it does not appear to address the issue of fiscal drag on the rest of the taxpaying population, which would continue to be government policy.
The party would double the high income child benefit charge income threshold to £120,000, with the withdrawal taper operating up to £160,000, and this would apply on a household basis rather than by reference to the highest earner. LITRG raises the potential extra complexity of tracking income on a household basis and the IFS highlights a missed opportunity to return to a time when the benefit was universal, and somewhat simpler.
First-time buyer relief from stamp duty land tax would be made permanent (up to a £425,000 threshold), and the party commits to no major changes to council tax (including no revaluation exercises).
The Conservatives also aim to raise ‘at least a further £6 billion a year from tackling tax avoidance and evasion by the end of the Parliament’.
Commenting on the manifesto, Stuart Adam, Senior Economist at the IFS, highlights a number of areas where there is now a commitment not to make ‘essential and urgent reforms’ including a council tax revaluation in England (with the existing bands now 33 years out of date), or a long-term plan to replace revenue from road fuel duty as electric cars replace petrol and diesel. As Adam notes: ‘It is perfectly reasonable for a party to want to cut taxes rather than increase them. But the pledges in this manifesto would also rule out vast swathes of sensible structural reform of the tax system.’
