The second article in our series looking at the key tax pledges from the various manifestos published in the last week.
The launch of the Labour, Conservative and Liberal Democrat manifestos has brought us many new announcements, policies and headlines. This article is the second part in our series of weekly updates on election pledges in the run up to 8 June. This week’s article focuses on the key tax policies announced in the various manifestos at the time of writing, 18 May 2017.
Many of the Labour policies that were leaked (see last week’s article) came to fruition in the final manifesto along with more clarity on the costings. Labour’s ‘radical’ and ‘responsible’ manifesto promises a country run ‘for the many, not the few’ through a fundamental reform of the tax system. The manifesto is a complete change in the approach and the philosophy behind recent tax and spend policy in the UK with the key pledges backed by the principle of tax more, spend more.
Under a Labour Government corporation tax would increase to 26 percent by 2020-21. Labour also propose to lower the threshold for the 45 percent additional rate to £80,000 and introduce a new 50 percent income tax rate for those earning above £123,000.
If elected, Labour will also look to introduce a ‘fat cat’ excessive pay levy, reportedly charged at 2.5 percent of earnings above £330,000 a year and 5 percent on earnings above £500,000. Labour want to clamp down on tax avoidance to the tune of £6.5 billion by introducing a “Tax Transparency and Enforcement Programme”. Labour also want to reverse tax reductions on capital gains tax and inheritance tax and scrap the married persons’ allowance as well as introduce a ‘Robin Hood’ tax by extending stamp duty reserve tax.
The Conservative Party have sought greater flexibility on tax policy by ending the ‘tax lock’ from the 2015 manifesto that pledged no increases in income tax, VAT or national insurance; only a pledge not to raise VAT remains. The manifesto does however keep the previous commitment to reduce corporation tax to 17 percent by 2020.
Echoing the ‘strong and stable’ mantra, the manifesto looks to continue many of the trends seen throughout the coalition years and the recent Conservative Government. The Conservatives aim to keep taxes ‘as low as possible’ and simplify the tax system.
The trend of increasing the personal allowance looks set to continue if the Conservatives are elected with plans to increase the allowance to £12,500 by 2020. As well as this, the threshold at which an individual pays 40 percent income tax will be increased to £50,000 by 2020.
There are proposed changes for the elderly – increases in state pension will only be based on the higher of earnings or inflation from 2020 (removing the third leg, a fixed 2.5 percent, of the triple lock). In addition, self-funding of care costs will be revised, bringing in the value of the main home into the savings calculation for domiciliary care as well as care homes, but increasing the de minimis savings limit from £23,250 to £100,000.
The Liberal Democrats’ flagship tax policy is a 1p rise on the basic, higher and additional rates of income tax and the rate of dividend tax from 2018-19 to pay for the NHS and social care. In addition, the Liberal Democrats propose to increase corporation tax but only back to the 20 percent rate.
The Liberal Democrats have put ‘fairness’ at the centre of their tax policy to help those on low and middle incomes in a manifesto that is an unashamedly pro-European programme for opposition. Tax revenue raisers look set to fund increased spending on health and social care as well as education. Many of the tax related announcements look to long term reform and consultation.
The Liberal Democrats want to reverse tax reductions on capital gains tax, inheritance tax and scrap the married persons’ allowance. In addition, the Liberal Democrats also want to introduce a cannabis tax as part of creating a legal regulated market for the drug.
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