With manifestos yet to be formally published we take a look at the tax policies already announced by parties across the UK.
With the election manifestos expected to be published in the week commencing 15 May, the major political parties in the UK have tested the waters of public perception by making various announcements on policy ideas. We will be publishing weekly updates on election pledges in the run up to 8 June including more detail on the formal manifesto pledges when published. This week’s article focuses on the key tax policies announced at the time of writing, 11 May 2017.
The majority of headlines have so far come from the Labour Party through their leaked manifesto and various announcements. One of the flagship announcements so far was the Shadow Chancellor announcing a ’personal tax guarantee’ meaning no increase in income tax or national insurance contributions (NIC) for 95% of taxpayers. It appears that the converse of this is income tax increases for those earning more than £80,000.
Labour have however ruled out any increases in VAT but look set to reverse cuts to capital gains tax and corporation tax. Reports have claimed that corporation tax could be increased to 26% by 2020. These increases are expected to fund a host of policies, especially in the education sector with the leaked manifesto showing plans to scrap university tuition fees, restore student maintenance grants and create a "cradle-to-grave" national education service. Labour have also announced plans to increase Insurance Premium Tax from 12% to 20% for private health insurance to pay for free car parking at NHS hospitals.
In the area of the "future world of work" Labour look set to shift the burden of proof in the gig economy so there is a presumption that a worker is an employee unless the employer can prove otherwise. This policy could be the start of a reform in how we tax work much in the same way as Chancellor Philip Hammond sought to increase self-employed NIC to narrow the difference in the tax paid between employed and self-employed people.
The Conservative Party have yet to make any major announcements on tax with most of the press focus being on what they haven’t said rather than what they have said. This is of course the refusal to repeat the 2015 pledge not to increase income tax and NIC over the life of the Parliament. This manifesto pledge led to a U-turn earlier this year from the Chancellor on an increase in self-employed NIC. So far the Conservatives have stated that they need flexibility on tax policy, hinting at a move away from long term binding promises.
The Conservative Party have however ruled out an increase in VAT, maintaining that they are a lower tax party compared to the alternatives on the ballot paper.
The Liberal Democrat’s flagship tax policy looks set to be a 1p rise on the basic, higher and additional rates of income tax and the rate of dividend tax from the next financial year. This is expected to raise £6 billion and will be ring-fenced in England to pay for the NHS and social care. It also appears that the Liberal Democrats will increase corporation tax to 20% and reverse the married tax allowance to fund an expected £7 billion investment in education.
Other parties across the UK have been relatively quiet on tax policy announcements with the SNP last year dismissing the idea of increasing the top rate of income tax to 50%. The Green Party are expected to announce increases in corporation tax and income tax for high earners, with a possible 60% additional rate of income tax mooted.
As the manifestos are published and more policies announced we will provide further details and commentary.
For further information please contact:
Patrick Martin | Partick.Martin@KPMG.co.uk
Paul Harden | Paul.Harden@KPMG.co.uk
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