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Jon Hickman
Corporate Tax Partner
With so many pledges, claims and counter claims being made by political parties in the countdown to the General Election, it can be hard to compare the tax policies on offer. We have distilled the pledges into a handy summary so that you can compare their competing pitches on tax and other business measures.
Category | Conservative Party | Labour Party | Liberal Democrats | Green Party | Reform UK |
Corporation tax | No change | No change | No change | No change | Cut corporation tax; create SME nil band |
Levies and windfall taxes | Extend Energy Profits Levy (oil and gas) if prices do not fall | Extend and increase Energy Profits Levy (oil and gas) | Increase taxes on oil, gas, banking, water companies and digital services
| Increase taxes on oil, gas and banking | Scrap energy levies |
Indirect Taxes | No change | Impose VAT on private school fees | No change | New tobacco levy and extend soft drinks levy | Increase VAT registration threshold to £150,000 |
Net-zero | Delay ban on internal combustion cars to 2035 | Re-instate ban on sale of internal combustion cars by 2030. Measures to encourage EV use | Ban internal combustion cars use by 2035 Introduce carbon tax on UK and imports
| Remove all net zero levies | |
Income tax | Keep thresholds freeze until 2028
Increase personal tax allowance for retirees and increase High Income Child Benefit threshold to £120,000 | Keep thresholds freeze until 2028 | Keep thresholds freeze until 2028
Increase personal allowance when finances allow | No Change | Increase personal allowance to £20,000 25% transferrable marriage allowance Increase 40% threshold to £70,000
|
Capital gains tax | CGT relief for landlords who sell to their tenants for two years
| Changes to taxation of carried interest for private equity
| Potential increase to CGT rates for high earners | Set entrepreneurs tax rate at 5%
| |
Inheritance Tax | No pledges | All assets in offshore trusts to be liable to IHT
| No pledges | Reform IHT | Abolish IHT on estates ≤ £2m; reduce rate on higher estates
|
Employment Taxes | Reduce NICs for employees by 2% to 6% and reduce Class 4 NIC to 0%. | Increase employee rights | Increase employee rights and minimum wage | Abolish Upper Earnings Limit so all individual NIC at full rates £15 per hour minimum wage | 20% employer’s NIC for where foreign workers recruited |
The headline is that none of the main parties is planning to increase corporation tax but, conversely, only the Reform party is pledging to cut it; to 20% and then 15% in the longer term as well as creating a £100,000 nil band for SMEs. Similarly, no party has suggested ending the capital allowances full expensing rules.
Of course, there are many taxes specific to economic sectors that will have an impact and here there is more diversity in the parties’ approaches.
The current Energy Profits Levy (Oil and Gas) and Electricity Generators Levy, are windfall taxes that are currently due to expire on 31 March 2029. The Conservatives may extend it if prices do not return to normal and the Labour party has pledged to extend the duration of these levies until "the end of the next Parliament”, increase the rate by 3% and remove reinvestment reliefs. The Liberal Democrats would add a one-off windfall tax on the super-profits of oil and gas producers, the Green Party would increase the rate of the Energy Profits Levy and remove the reinvestment reliefs. The Liberal Democrats are also proposing a Sewage Tax on water company profits as well as increasing the current Digital Services Tax to 6%. Banking is also featured with restoration of the Bank Surcharge and Bank Levy to 2016 levels suggested by the Liberal Democrats and a windfall tax on "excessive profits" proposed by the Greens. A more unusual proposal from the Liberal Democrats is the introduction of a 4% tax on share buy-backs of FTSE-100 listed companies across all sectors.
Both Labour and the Liberal Democrats propose replacing the current business rates system to create a more level playing field with 'giant online retailers'. Reform UK pledge to exempt SME businesses while creating a 4% delivery tax for large online retailers. The Conservatives would continue business rates support for small businesses by the increasing business rates paid on warehouses by online retailers.
All parties say they want to boost investment in UK R&D, citing competing levels of government investment in future years, but there has been no mention of changing the current R&D reliefs for corporate investment - good news given all the recent changes in the UK R&D regime.
On business investment, the Labour party has made a number of pledges focussing on growth and wealth creation including proposals for a state-owned Energy company (GB Energy) to boost investment in net-zero transition, a UK wealth fund seeded with £1.5bn government funding a year to boost investment in specific sectors, an industrial strategy and ten year infrastructure strategy. It has committed to publish a business tax roadmap for the whole of the next Parliament and pledged only "one major fiscal event a year, giving...due warning of tax and spending policies".
The Conservatives have pledged to allow more areas apply for Freeport status and create Business Rates Retention zones (allowing Local Authorities to retain Business Rates revenue to invest in local business infrastructure).
On planning reform, Labour pledges to speed up development by removing red tape and update national planning policy to give greater priority to development. The Conservatives also aim to cut infrastructure approval times from four years to one and the Liberal Democrats would set planning fees to reflect the actual cost of delivering an efficient planning service.
While no party has suggested an increase in VAT, Reform UK would increase the VAT registration threshold to £150,000 and reintroduce the VAT refund scheme for tourist shopping. Labour would impose VAT on private school fees as well as removing businesses rate relief or its future equivalent. Similarly, no party has directly commented on alcohol duties. The Liberal Democrats have proposed a new levy on tobacco company profits to fund healthcare as well as extending the Soft Drinks Levy, known as the sugar tax, to milk based drinks.
There is surprising unanimity on the introduction of a UK Carbon Border Adjustment Mechanism (CBAM) similar to the current EU CBAM with the Conservative, Labour and Liberal Democrats all pledging to introduce it for imports by 2027. The Green party is proposing a carbon tax on both UK and imported goods while Reform propose removing all net-zero related levies.
The Conservative manifesto commits them to maintaining most current tax reliefs for small businesses including the Enterprise Investment Scheme and Seed EIS, Business Asset Disposal Relief from CGT and Inheritance tax relief for business and agricultural property. They also pledge to reduce the rate of Class 4 NIC paid by the self-employed from 6% to zero by the end of the next Parliament. Labour has pledged to maintain the £1m Annual Investment Allowance and Reform would reduce corporation tax (as previously mentioned).
The Green party is the only main party suggesting an all-embracing carbon tax, whereas the other parties propose various R&D and investment/support mechanisms to help decarbonise the UK economy. Both the Greens and the Liberal Democrats propose ‘frequent flyer’ rates of air passenger duty that increase the more you fly.
While the Conservative government has delayed the ban on sale of internal combustion engine (ICE) cars to 2035, the Labour and Liberal Democrat manifestos commit them to returning the phase out date to the original 2030 deadline. The Greens would phase ICE cars out by 2027 and ban their use by 2035. Labour has pledged to accelerate the rollout of EV charging points and the Liberal Democrats promise to cut VAT on public charging to 5%. Read more on tax efficient EVs.
Reform UK would introduce a 20% rate of employers' NIC where foreign workers are recruited but none of the other parties has proposed any changes to employers’ NIC or the pensions auto-enrolment obligations of employers. However, several parties have made specific proposals on the National Minimum Wage.
The Conservative party would maintain the National Living Wage at two-thirds of 'median earnings' – which is expected to push the rate up to £13 per hour by 2029. Labour have pledged to remove age bands so that there is only one rate. They would also change the remit of the Low Pay Commission to ensure that "the minimum wage is a genuine living wage". The Liberal Democrats pledge to scrap the Apprenticeship rate, create a carers rate that is £2 per hour above the basic rate and ensure that anyone on a zero-hours contract is paid at least 20% above the basic rate. The Greens would have a flat rate at £15 per hour.
There are significant proposals on employee rights across the manifestos. Labour plans a "New Deal for Working People" by rapidly legislating to ban "exploitative zero hours contracts; ending fire and rehire; and introducing basic rights from day one to parental leave, sick pay, and protection from unfair dismissal". The Liberal Democrats would establish a new ‘dependent contractor’ employment status in between employment and self-employment with entitlements to basic rights such as minimum earnings levels, sick pay and holiday entitlement. Similarly, the Greens would include gig-economy workers under a single legal status of ‘worker’ with full and equal rights from the first day of employment whereas Reform would abolish IR35 and the Liberal Democrats would review it.
Labour proposes to strengthen rights to equal pay and introduce protections from maternity and menopause discrimination. They would also take action to reduce the gender pay gap and create a "Single Enforcement Body" to ensure employment rights are upheld. The Liberal Democrats would require large employers to "monitor and publish data on gender, ethnicity, disability, and LGBT+ employment levels, pay gaps and progression" as well as doubling Maternity and Shared Parental Leave pay to £350 per week, up to 90% of earnings and shifting the burden of proof in employment tribunals from individual to employer (in relation to employment status).
The Conservatives would introduce a Lifelong Learning Entitlement, a new National Service program for 18 year olds and allow adults to take loans for fund courses for new qualifications. They plan to create 100,000 apprenticeships a year by the end of the next Parliament. Labour have pledged to replace the current Apprenticeship Levy with a "flexible Growth and Skills Levy, with Skills England consulting on eligible courses". The Liberal Democrats would also seek to replace the Apprenticeship Levy with a broader and more flexible skills and training levy as well as introduce new Lifelong Skills Grants. Reform UK would increase technical courses and apprenticeships and the Greens would invest £4bn to develop skills required for the transition to net-zero.
Labour has pledged to "end the long-term reliance on overseas workers in some parts of the economy by bringing in workforce and training plans for sectors such as health and social care, and construction". It would also ban employers and recruitment agencies from recruiting overseas if they breach employment law.
None of the main parties would increase income tax rates but, apart from Reform UK, neither are they proposing to increase tax bands either resulting in ‘fiscal drag’. Many people will move into a higher tax bracket simply due to rising wages. The current freeze on thresholds is due to end in 2028 so in the meantime the UK overall tax take will increase.
Reform UK propose increasing the personal allowance to £20,000, a 25% transferrable married couples’ allowance and increasing the higher rate (40%) threshold to £70,000.
The Conservatives have pledged to increase the personal tax allowance for retired people so that no-one should ever pay income tax on their state pension alone. The Liberal Democrats have pledged to increase the personal allowance as a priority “when the public finances allow”.
On the High Income Child Benefit Charge, the Conservatives have pledged to double the clawback threshold to £120,000 of joint household income. They estimate that this would benefit 700,000 households. However, for those with household income between £120,000 and £160,000, the effective marginal rates of tax could be as high as 70% as the new clawback kicks in.
While the Green party would not increase the basic rate of tax during a “cost of living crisis”, they would seek to tax investment income at standard income tax rates and limit tax relief on pension contributions to the basic rate.
The Conservatives have confirmed an existing pledge to reduce National Insurance Contributions (NIC) for employees by 2% (to 6%) by 2027 (and to zero “when financial conditions allow”) and would reduce Class 4 NIC to zero by the end of the next Parliament, – see the current rates. The Greens who would abolish the Upper Earnings Limit so that the full rates of Class 1 and 4 would be paid by anyone earning over £50,270, currently the rate falls to 2% on higher incomes.
On CGT, the Liberal Democrats pledge “Fairly reforming capital gains tax to close loopholes exploited by the super wealthy”. They propose a tax rate of 20% (for gains up to £50,000), 40% (between £50,000 and £100,000) and 45% (over £100,000) with these rates solely based on the gains made. The annual allowance would increase to £5,000 and an 'inflation allowance' would return. The Greens also propose to align rates of tax for gains with income tax rates and push for a wealth tax over time.
Labour plans to ‘close the loophole’ through which private equity carried interest is currently taxed at 28% because it is treated as a capital gain. The rate that might apply in future is yet to be confirmed and the Labour manifesto makes no mention of other CGT measures. The Conservatives plan not to increase CGT, to retain tax incentives linked to business growth such as BADR and introduce CGT relief for landlords who sell to their tenants in a two year period.
While the Conservative government has already proposed abolishing the UK’s tax regime for non-UK domiciled individuals, there is no specific mention of the proposals in their manifesto. The Labour manifesto confirms that it plans to abolish the ‘non-dom loophole’ although there are no specific proposals for a replacement regime for short term UK residents.
Labour have proposed that all assets held in offshore trusts, such as excluded property trusts, would fall within the UK inheritance tax (IHT) regime. There is no other reference to IHT in the Labour manifesto, nor is it mentioned in the Liberal Democrats proposals. However, the Conservatives have pledged to retain both Business Relief and Agricultural Property Relief and Reform UK has pledged to ‘abolish’ IHT on estates valued at less than £2m and reduce the rate to 20% for higher value estates. The Greens would reform IHT to tax intergenerational wealth transfers ‘more fairly’.
The Conservatives intend to make the current £425,000 nil band for first time buyers in England and Northern Ireland a permanent relief (it is currently due to expire on 31 March 2025) but freeze all other rates and bands of SDLT. Labour intend to increase the SDLT surcharge applied when overseas nationals buying UK residential property by 1% (taking this surcharge to 3%).
The first key date following the General Election will be the State opening of Parliament which is planned for 17 July. This will enable the new government to set out its legislative agenda including any specific Bills on its manifesto pledges.
Most parties have pledged to have a full Office of Budget Responsibility report to support their Budget proposals. The report will take at least 10 weeks to complete. This makes an ‘emergency Budget’ unlikely.
So, the earliest the next fiscal event can occur is mid-September, whether this is an Autumn statement or a full Budget, but it may occur later in the Autumn. The only other consideration is the ‘first 100 days’ pledges of some parties which may mean that businesses must be ready for changes being implemented sooner.
If you are concerned about any specific tax policies and would like to discuss how to address those worries, please get in touch.
Jon Hickman