This blog is the first in our Parties Under the Microscope series, where we’ll be taking a comparative view of some of the nation’s most hotly contested issues in the run-up to the General Election. The impending election will be a hugely influential factor in how the future looks for all of us. In this series, we aim to lay out the facts without bias, providing a comparison on the manifestos of each party. Here at AGL Wealth, we have a culture of accountability and communication. It is our hope that these blogs accomplish both of these aims and help you make the best possible decision for you in next week’s election. Whatever you do, make sure that you have your say.
Now, without further preamble, we’ll kick off the series with our first big issue; taxation. Taxation is a hugely divisive issue amongst the parties. Here, we’ll be giving an overview of the standpoints of the Conservatives, Labour, Lib Dems and the SNP. So, running in alphabetical order, we’ll begin with our current majority, the Conservatives.
The Conservative Party
Before the publication of the party’s manifesto, many had speculated that it would include a rise in taxation. Since its publication, the PM has spoken out, stating that ‘the Conservatives will continue to be a lower tax party.’
The Conservative Manifesto has stated that ‘paying your fair share of tax is the price of living in a civilised democracy’. However, they have added a caveat being that ‘politicians should never forget that taxes are levied on businesses that employ people and individuals who work hard and face tough decisions about how they spend their money.’ With this in mind, the Tories have pledged to carry out the following if elected into office again:
- Raise income personal allowance threshold to £12,500 and the higher 40% bracket threshold to £50,000 by 2020. This was a pledge originally made by ex-PM Cameron, which Ms May’s office now seek to fulfil.
- Keep VAT at current rate.
- Develop long-term reforms tackling business rates. Currently, many smaller firms who have lost rates relief as of 1st April 2017 are facing serious hikes in fees.
- Drop corporation tax to 17%, down from current 19%.
- Ensure tougher regulation of tax advisory firms that aid avoidance.
- Eliminate the country’s deficit by ‘the middle of the next decade’. This constitutes a decade-long delay on the deadline promised by ex-Chancellor George Osborne.
- There are also speculations that the manifesto hints at possible rises to National Insurance.
The Labour Party
The Labour Manifesto carries the strapline ‘for the many, not the few’. The taxation pledges contained within the document seem to follow suit. If elected, it looks like the few could indeed be in for some very sizable tax bills. Jeremy Corbyn and his party have made pledges to fulfil the following, should the party be elected into power:
- Corporation tax will rise significantly to 26% for some of the country’s largest corporations. This has been one of the most controversial of Labour’s manifesto pledges. The gains from the increase in corporation tax have been earmarked for the party’s huge programme of investment.
- A levy for firms with ‘a large number of employees with a very sizeable pay packet’.
- No rises in income taxation for 95% of taxpayers. Labour claims that its plans guarantee no changes for those earning £80,000 or less per year. This leaves around 1.2m British people who will be faced with sizeable tax hikes.
- Reducing the threshold for 45p income tax to £80,000. This would constitute a fall from the current £135,000 threshold.
- Food, children’s clothing, books, newspapers and public transport fares will remain exempt from VAT.
- Increased support for small businesses including removing quarterly reporting requirements from businesses whose turnover is £80,000 or less.
- Reintroducing lower small profits rate of corporation tax.
- More powers granted to HMRC in order to tackle tax avoidan
The Liberal Democrats
The Lib Dems made Brexit the central focus of their manifesto, a topic which we will discuss in detail in this series. However, taxation pledges did make an appearance in the manifesto, with pledges to reverse many Conservative-made regulations that have taken place in recent years. The party stated that they would accomplish the following:
- Raise National Insurance threshold to the income tax threshold, whilst still protecting the ability of low earners to accrue pension and benefit entitlements – in the long term and as resources allow.
- Facilitate the reversal of Capital Gains Tax Cuts, Capital Gains Tax Extended Relief, the raising of Inheritance Tax Threshold and the Marriage Allowance.
- Reverse plans to cut Corporation Tax from 20% to 17%.
- Discuss a movement away from a profits-based tax to one that uses a wider range of economic activity indicators, such as sales and turnover.
- Review Business Rates system and prioritise reforms which recognise the development of the digital economy, lessen the burden on small businesses and ensure the continued competitiveness of the Great British High Street.
- Review the burden of taxation and spending between the generations.
- Introduce a General Anti-Avoidance Rule, which sets targets for HMRC to reduce the tax gap.
The Scottish National Party
As many expected, the SNP Manifesto detailed plans to launch a second Scottish Independence Referendum at the end of the Brexit process. The party also put forward pledges to:
- Support an increase in the Additional Rate from 45p to 50p in the UK as a whole from 2018. In the current financial year, the party did not vote to increase the Additional Rate of income tax in Scotland alone. The manifesto states that to do so in Scotland alone would lead to a loss of revenue.
- SNP MPs will oppose any proposed increases in VAT or National Insurance.
- Support the reversal of Marriage Allowance.
- Support reversal of reduction to bank levy.
- Support the introduction of taxation on bankers’ bonuses.
- Support the oil and gas industry, furthering the recent work of SNP MPs in abolishing petroleum revenue tax and halving the supplementary charge to 10 percent.
- Press for further action on tax evasion, tackling the use of Scottish Limiting Partnerships for criminal activity, fraud and tax avoidance.
- Back a moratorium and review of the closure of Scottish HMRC offices – and throughout the UK.
- Back measures to make information on beneficial ownerships of companies and trusts available to the public.
- Back measures to facilitate greater transparency of tax paid by major international organisations.
It was recently announced that the UK now sits dead last in the G7 update on the first quarter of 2017. Unlike top runner Canada whose GDP grew by 0.9% in Q1 2017, Britain’s GDP grew by just 0.2%. With this in mind, all parties will be looking for a way to galvanise the UK economy and evaluate taxation in a way that bolsters the thriving of UK businesses. However, as you can see from the above comparison, the parties have some very different approaches to accomplishing this.
The General Election brings with it a time of uncertainty. If you are concerned about the stability of your financial circumstances or the viability of your investments in light of possible change, don’t hesitate to get in touch with one of our expert advisors.