01 July 2024
With only a few days to go until the 2024 General Election, all eyes are on the UK political parties and what they will offer should they come into power.
While Rishi Sunak’s message of a ‘clear, bold action and secure future’, Kier Starmer is proposing a ‘plan for change’. Both of their manifestos have been laid out, setting out their plans should they be elected. But amongst all of the noise and headlines, it can be hard to keep up with all of the details.
Below we take a high level look into what the main tax announcements are, so individuals and entrepreneurs can decipher what it means for them.
1. National Insurance
Under the Conversative plan, National Insurance (NI) will be cut until it is abolished entirely. By 2027, Employee NI will be cut to 6%, meaning that it will be halved from 12% at the beginning of this year. For those who are self-employed, the main rate of NI class 4 contributions will also be abolished entirely by the end of the next Parliament. This won’t affect the entitlement to State Pension.
Labour do not plan to increase National Insurance, but have deemed the Conservative’s plans to scrap NI as unviable.
2. Income tax and VAT
Neither the of the major parties plan to make changes to Income Tax or VAT. Interestingly, Labour mention there will not be changes to income tax rates but do not mention the actual rate bands and if they will change.
However, the Reform Party will increase the income tax personal allowance to £20,000 and increase the VAT registration threshold to £150,000 from the current threshold of £90,000.
3. Capital Gains Tax
Conservatives do not plan on making any changes to Capital Gains Tax (CGT), but this is an area of tax that the Labour party have not ruled out.
It may not be at all surprising if a new Government aligned the Capital Gains Tax rates with Income Tax (CGT). Meaning the current CGT rates on gains made on assets (not including residential property) of 10% and 20%, could be increased to 20% and 40/45%.
If you have assets that are standing at a current gain, and were considering disposing of them anyway, it may be sensible to look at this prior to the election. Although, we always recommend speaking to your advisors beforehand, to ensure you understand the tax implications of the disposal in question.
4. National Living Wage
The Conservatives plan to maintain the National Living Wage, each year of the next Parliament, at two-thirds of median earnings. Current forecasts predict that it would be rising to around £13/hour.
The Labour party plan to introduce a ‘genuine’ living wage, in place of the national minimum wage. The finer details of what this will look like in practice are not set out in their Manifesto, but so far, the party has said it will account for the cost of living, for the first time.
5. State Pension
Conservatives say that the State Pension won’t be dragged into Income Tax for the first time in history by introducing a new Triple Lock Plus regime. This has two elements:
- Continuing to increase the State Pension in line with the highest of prices, earnings or 2.5%;
- The tax free personal allowance for pensioners will also increase by the highest of prices, earnings or 2.5%. Guaranteeing that the new State Pension is always below the tax-free threshold. From April 2025, a new age-related personal allowance will be introduced.
Under the new Pensions Tax Guarantee, there won’t be any new taxes on pensions and the tax free 25% lump sum will be maintained.
Meanwhile Labour have set out to protect the triple lock on pensions. They will also increase state pension each year of parliament, in line with inflation, earnings or by 2.5% - whichever out of these three is the highest.
6. High income child benefit
Whilst the Conservatives have addressed the High Income Child Benefit threshold test, this is a subject matter which hasn’t been addressed in Labour’s manifesto.
Conservatives will move to a household income test, rather than an individual income test. Those who have a combined household income of £120,000 will start to lose Child Benefit. It will gradually be removed until the combined income reached £160,000. Anything above this threshold and families will no longer receive the benefit.
7. Stamp Duty Land Tax
Under Labour’s plans, Stamp Duty Land Tax will be increased by 1% ‘in relation to the purchase on residential property by non-UK residents’. This is predicted to raise £40m in revenue by 2029.
Conservatives, plan to get rid of Stamp Duty for homes up to £425,000 for first time buyers. They have said they will also not increase the rate or level of Stamp Duty.
8. Corporation Tax
The Conservation and Labour parties both plan to maintain the current 25% Corporation Tax rates. Labour will cap the current level of Corporation Tax at 25%, unless they have to act in accordance to international changes which will threaten the UK’s competitiveness.
9. Non-dom Status
Labour will abolish the non-dom status and replace it with a scheme for people genuinely in the country for a short period. They will end the use of offshore trusts to avoid inheritance tax. This will mean that everyone who makes their home here in the UK pays their taxes here.
There is no outright mention of non-dom status in the Conservative’s manifesto but they have announced their plans to get rid of the regime also.
Do you need to take any action?
Whichever party comes into power come 4th July, we do not know how quickly changes will come in to effect. This King’s speech is scheduled for 17th July and no parliamentary business can occur until after the speech is delivered.
Historically, tax changes will be announced in a Budget following the election and the Government needs to provide the Office of Budget Responsibility with 10 weeks’ notice, if they want to include a complete economic and fiscal forecast alongside the budget.
That being said, a Budget can still be arranged without this. Shadow Chancellor Rachel Reeves has said if she were Chancellor, she would not hold a Budget without an independent forecast from the OBR. Therefore, if Labour are in power, realistically the earliest a fiscal event could be held would be 13th September.
We would strongly urge you not to rush into any financial decisions without knowing which party has come into power. If you’re looking into your plans, personal wealth and assets and have any questions ahead of, or after the general election, our team of private client specialists are here to support you. Please do not hesitate to contact us.
