To help therefore I am setting out the manifesto contents covering tax of each of the three main political parties. In doing so I will try to be as neutral as possible and refrain from commentary (which anyone who knows me personally will know will require enormous self-restraint). All I will say is that reading political manifestos, it is often difficult to pick out the substance from the spin so if anyone feels that I have missed something important or somehow misrepresented a party’s proposal then I can assure you it was purely accidental on my part!
The Conservative Party
- No rises in income tax, national insurance or VAT rates.
- Cancellation of the planned reduction in corporation tax rates to 17% - the rate to remain at the current level of 19%.
- A target to raise the national insurance threshold – the income level at which people begin to pay NI – to £12,500 in line with the income tax threshold. An immediate increase to £9,500 from the current £8,628.
- Increasing the employment allowance from the current £3,000. This gives businesses an effective rebate of the first £3,000 of employers’ national insurance due each year.
- Increasing the research and development (R&D) tax credit rate to 13%.
- A review and reform of Entrepreneurs Relief – the effective 10% rate of capital gains tax due on the sale of businesses. No real comment on the direction that would take other than a belief that it isn’t currently working to achieve its stated aims.
- Fundamental review of business rates with interim increased relief for retailers and extension of those relief to selected others including pubs.
- Implementing the Digital Services Tax for major multinational companies.
- The 45% rate of income tax to start at £80,000 of income (currently £150,000).
- A new 50% rate of income tax to start of £125,000.
- Abolition of dividend tax rates – currently basic rate 7.5%, higher rate 32.5% and additional rate for income over £150,000 of 38.1%. Dividends to be taxed at the same rates as other income. This would make dividends paid by small business owners after corporation tax taxed at the effective rates of 36.8% for basic rate taxpayers (currently 25.075%), 52.6% higher rate (45.325%) and 56.55% (49.861%) and 60.5% (49.861%).
- Abolition of the married couples allowance which allows low earning couples to switch allowances to reduce their tax bills.
- The main rate of corporation tax to rise to 21% immediately and over two years to 26%. Companies with profits below £300,000 will see a rise from 19% to 21% over the same period.
- Introduction of an Excessive Pay Levy though no real details are provided.
- Abolition of capital gains tax rates of 10%, 20% and 28%. Capital gains to be taxed as additional income and taxed at income tax rates (20—50%).
- Abolition of capital gains tax annual exemption which currently allows the first £12,000 of capital gains each year to be tax free.
- Abolition of R&D tax credits and the Patent Box 10% rate of corporation tax as well as a review of all corporate tax reliefs e.g. the substantial shareholding exemption.
- Abolish planned increases in inheritance tax thresholds.
- Introduction of a Second Homes Tax, an annual tax levied at 200% of whatever the council tax bill for the property is set at.
- Requirement that any company employing more than 250 people places 10% of its shares into trust for their employees. Maximum annual benefit/dividend of £500 per employee. Any excess dividends over that would result in more than £500 per employee to go to the government to fund a Climate Apprenticeship Fund.
- Stamp Duty Reserve Tax – the 0.5% tax on share purchases – extended to all financial transactions.
- Introduction of 20% VAT on private school fees.
- Corporation tax increased to 20%.
- Abolition of the capital gains tax annual exemption.
- Replacement of business rates with a Commercial Landowner Levy based solely on the capital value of the land (not anything build on the land) with liability switched from tenant to landlord.
- Introduction of a General Anti-Avoidance Rule for all taxes.
- Scrapping the married couples allowance.
- Reforming the place of establishment rules that define where multinational companies pay their taxes.
- Ending the Loan Charge rules that have “retrospectively” taxed those who previously engaged in avoidance schemes such as EBTs.
- Reviewing the planned extension of IR35 which seeks to tax those providing their personal services through limited companies effectively as employees.
- Allowing employees of companies employing more than 250 people to have the right to be given a share in the company.
Whilst avoiding commentary, I’m sure even that snapshot gives a taste of the radically different approaches of each party. If you would like to discuss how any of this might affect your individual circumstances, please feel free to contact me at barry.soraff@raffingers.co.uk