7 June 2017
The upcoming snap election has seen all of the major UK political parties rush to clarify their stances on all manner of issues. Our sister company MyAccountant had a look and rounded up the major tax policies being put forward by the parties (all of which are subject to change as we have seen from Mrs May before…) and we thought to bring this to you as it will affect everyone after all.
There has been a pledge not to increase VAT. However, it has long been mooted that a National Insurance rise will be incoming, especially for the self-employed, which was already announced in the Spring Budget and then immediately rescinded after a public backlash.
The manifesto also omits the recent dividend allowance changes, but it is thought it will still go ahead from April 2018 and reduce the allowance from £5,000 to £2,000. The Chancellor is still committed to increasing the personal allowance to £12,500 by 2020, and Corporation Tax will continue to fall to the long-planned 17%. Increased incentives for those investing via the EIS and SEIS schemes are also in the pipeline.
The promise to simplify the tax system remains, although how increasing the number of annual submissions from one to six is deemed “simplifying” is beyond me. The Tories have outlined intentions to give ‘gig’ economy workers greater rights.
The Labour Party manifesto proposes to raise an additional £50 billion from various measures including an increase in Corporation Tax, Income Tax and Stamp Duty. The Additional Rate (45%) tax threshold would be brought down to £80,000 from £150,000 and a new 50% rate implemented from £123,000. They have however pledged to leave NI and VAT untouched.
Labour have said that for companies with annual profits below £300,000, they would “reintroduce the lower small profits rate of corporation tax”. This would equate to a small profits rate of 20% in 2018–19, rising to 21% in 2020–21 with a larger profit rate of 26%.
Financial transactions over a certain amount would suffer a “Robin Hood tax” to fund multi-billion pound spending commitments on health, education and policing.
The manifesto also includes a pay levy designed to discourage companies from paying “excessive” salaries. Companies paying staff more than £330,000 will pay a 2.5% surcharge while salaries above £500,000 will be charged at 5%. Labour has said the move, designed to reduce pay inequality by bearing down on “very high pay”, will only apply to firms with “high numbers of staff”.
Reversals of the Conservatives recent IHT, CGT and Entrepreneurs’ Relief cuts would raise further funds. Jeremy Corbyn has taken a hard stance on disguised employment with umbrella companies and ‘bogus’ self-employed targeted. A dedicated commission will be set-up to review the laws and practices around this.
Tim Farron’s party would increase the Income Tax by 1% across the board with the Basic Rate at 21%, Higher Rate to 41% and the Additional Rate for earnings over £150,000 to 46% in an attempt to raise £6.3 billion for health and social care by 2019/20. The Lib Dems say the currently planned cuts in Corporation Tax from 20% to 17% would also be reversed to raise a further £3.6 billion.
A review of the current Corporation Tax system would also be undertaken so it “benefits the smallest companies”. The focus on the currently profit-based tax will shift so that it takes account of sales and turnover.
The party is also pledging a ‘reform to dividend tax relief.’ Abolishing Tory cuts on CGT, IHT and Marriage Allowances would see another £2 billion for the Exchequer. Similar to the Tories, a Farron-led government would also update employment rights to fit in with current models and new ways of working such as ‘gig’ work. A tax on their plans to legalise cannabis would raise a further £1 billion.
There are a lot of positives from all of the parties and we would urge you all to read the manifestos before you cast your vote on June 8th.
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