Have you had enough of the electioneering and all the televised debates? Or perhaps you’ve been finding some light relief from the politics by watching the Euro’s 2024. As we write this blog, we are reminded that only ten days are left before voting day.
A new government could bring about significant changes in legislation and taxes that could substantially impact your business operations and financial planning. We know some of the content here might be a bit dry, but we wanted to give you a heads-up in case you want to chat about anything or if you’re making some decisions.
We are summarising the tax policies outlined in the newly released manifestos. For comparison purposes, we will only consider the tax policies of the two major parties, Labour and Conservatives. Based on current polls, Labour is projected to secure a significant majority in the House of Commons, so they may not need to make many compromises.
Income Tax
-
Conservatives
Income tax rates will not be increased.
The government plans to introduce a new ‘Triple Lock Plus’ tax-free allowance system for pensioners. This means that the allowance will increase in line with the highest of inflation, earnings, or 2.5%, through a new age-related personal allowance. The new system will come into effect from April 2025.
The tax-free allowance is currently fixed at £12,570 for all taxpayers until 6 April 2028.
-
Labour
The income tax rates (basic, higher, and additional) will remain unchanged, and pension reforms will be implemented alongside a review of the pension landscape.
There are no comments on the current frozen tax-free allowance.
National Insurance (NIC)
-
Conservatives
The main rate of employee NIC is currently 8%, and a 2% reduction is promised to reduce it to 6% by April 2027. Additionally, NIC will not be extended to employer pension contributions.
- Labour
National Insurance will not be increased. There is nothing more on the subject.
Business Tax for self-employed
-
Conservatives
Further reductions in the main rate of self-employed Class 4 NIC. This is currently 6%, and the Manifesto promises to abolish it altogether by the end of the next Parliament (no later than July 2029).
-
Labour
A roadmap for business taxation for the next parliament will be published, enabling confident investment planning.
Corporation Tax
-
Conservatives
There are no plans to increase the rate, which is currently 25% for Companies with taxable profits of more than £50,000.
-
Labour
Corporation tax will be capped at the current main rate of 25% for the entire parliamentary term. There are suggestions of potential increases for companies with annual profits below £250,000.
Value Added Tax (VAT)
-
Conservatives
The VAT rate will not be increased. The VAT registration threshold will be reviewed, and options will be explored to smooth the cliff edge at the current £90,000 level.
-
Labour
The VAT rate will not be increased. VAT will, however, be applied to private school fees.
Capital Gains Tax (CGT)
- Conservatives
The current government plans to retain the Business Asset Disposal Relief. The current Private Residence Relief will also be maintained. A new temporary 2-year CGT relief will be offered to landlords who sell their properties to their existing tenants.
-
Labour
The absence of specific mentions regarding rates or reliefs potentially allows for flexibility in the future.
Inheritance Tax
-
Conservatives
There is no specific mention of rates or reliefs.
-
Labour
There are no specific mentions of rates or reliefs, but there are plans to impose IHT on offshore trusts.
Stamp Duty Land Tax
-
Conservatives
Rates and levels of Stamp Duty Land Tax (SDLT) will not be increased. The first-time buyer threshold will be permanently set at £425,000, instead of reverting to £300,000 on 1 April 2025.
-
Labour
SDLT on residential property purchases by non-UK residents will increase by 1%, increasing the existing surcharge from 2% to 3%.
Non-domiciled individuals
-
Conservatives
Interestingly, there is no mention of the previously announced plans to limit non-domiciled individuals’ use of the remittance basis from April 2025.
- Labour
The non-domiciled status will be abolished and replaced with a modern scheme for people genuinely in the country for a short period. We’ll just have to wait and see what this looks like.
Furnished Holiday Lets (FHL)
-
Conservatives
Councils will be given the powers needed to ‘manage the uncontrolled growth of holiday lets’. Beyond this, no further details are given on the planned April 2025 reform to limit tax benefits.
Of course, we mustn’t forget that in the Spring 2024 budget earlier this year, there was the decision to abolish the tax incentives enjoyed by FHL’s
-
Labour
We don’t have any indication of what policies will look like.
HM Revenue & Customs (HMRC)
- Conservatives
An additional £6 billion per year will be generated by addressing tax avoidance and evasion during the next Parliament. Although there are no specific details about funding for HMRC, there are promises to increase digital and AI capabilities across the broader civil service.
-
Labour
Labour has promised to tackle tax avoidance. An investment of £855 million will be made to reduce tax avoidance. Registration and reporting requirements will be increased, and HMRC’s powers will be strengthened. Technology will be invested to build capacity within HMRC, and there will be a renewed focus on tax avoidance by large businesses and the wealthy.
Will we have another budget?
If a new party comes to power on July 4th, it will likely announce its initial plans in an “emergency”budget.
The Office of Budget Responsibility (OBR) will need 10 weeks to prepare independent forecasts, which is unlikely until September or October.
2024 – What’s next?
What is interesting to note is that neither party mentions Making Tax Digital (MTD) specifically. We just want to remind you that during the Autumn 2023 Statement, the government announced some changes to the initial criteria. These changes are set to be launched in April 2026 for the self-employed and landlords. Could MTD partially address both parties’ desire to tackle tax avoidance? We’ll have to wait and see how it all plays out!
Regardless of the election outcome, we are here to support you through any changes. After the election and the announcement of any budget, we will inform you and will be happy to provide personalised advice if you want it.
Please feel free to reach out to discuss any concerns or to schedule a consultation. You can email your normal manager in the first instance.
We also recommend that you follow us on our social media pages, which are updated almost daily with news items.
If you are not yet working with us, have a look at how we work