Tax statements from the main political parties

Never mind a week: in a General Election campaign, a day is a long time in Politics.

Since the Prime Minister announced the General Election would take place on 4 July 2024, the press has been filled with tax statements from the main political parties.

Prior to the election announcement, Labour had already set out its stall in several areas. Its focus so far in the campaign has been to repeat or clarify some of these previous positions, and on 31 May the party released a statement titled “Labour Party tax policy: How we will make the tax system fairer”, which reiterated its key tax positions.

We are however, for the first time in this election cycle, getting some idea of Conservative tax policy positions.

More will become clear when the manifestos are issued but, in the meantime, this article explores what the main parties have said in key tax areas. It is not intended to provide an exhaustive account of all tax statements made by each party to date; instead it focuses on some key areas. There will inevitably be more announcements between the date of writing and the publication of formal manifestos.  

The Chancellor, Jeremy Hunt, has said that a future Conservative Government will not increase any rate of income tax or National Insurance for the duration of the next Parliament. He has confirmed that income tax thresholds will remain frozen until 2028 as already legislated, but that the freeze would not continue beyond this point. 

One important exception is the personal allowance for pensioners. Whilst both the Conservative and Labour parties have committed to maintain the pensions ‘triple lock’ (where the state pension rises in line with the higher of average earnings, inflation or 2.5 percent), the Conservatives have announced a ‘triple lock plus’ policy. This would see the personal allowance for pensioners increase by the same percentage as the triple lock. The intention is to ensure that the state pension will not, in isolation, push a pensioner into tax.

The Chancellor seems to be continuing his focus on incentivising work through the tax system and has said that tackling distortions in income tax would be a high priority for a Conservative Government. Some distortions can produce high effective tax rates; one example of such a distortion is for earnings between £100,000 and £125,140 where an effective tax rate of 60 percent can arise due to the tapering of the personal allowance. The removal of free childcare at this point can exacerbate that position even further.

Mr Hunt also reiterated his party’s ambition to abolish National Insurance altogether over the longer term when “it’s affordable”, which would reduce the distortion between those who receive earned income rather than unearned income, as well as between those below and above pensionable age. 

Labour has also confirmed it will not raise income tax or National Insurance. Sir Keir Starmer has said that Labour would not undo the freeze on income tax thresholds that will stay in place until 2028. No specific statements have been made by Labour on addressing distortions in the tax system, however the party has been carefully managing expectations around tax cuts, including the abolition of National Insurance. When asked if Labour would commit to a triple lock plus for example, the Shadow Chancellor Rachel Reeves told reporters “I want taxes to be lower, but I’m not going to make any commitment where I can’t say where the money is coming from. I will only announce those changes when we can afford to do so”.

Liberal Democrat Munira Wilson has said her party would not “look to” raise income tax or National Insurance.

One of Labour’s flagship policies is ending the VAT and business rate exemption for private schools. In terms of broader VAT policy the party has simply said it would not raise VAT.

The Conservatives have also committed not to increase the main rate of VAT for the duration of the next Parliament.

Labour had already committed to capping the headline rate of corporation tax at its current rate of 25 percent for the duration of the next Parliament as well as confirming they will retain certain reliefs such as full-expensing, the research and development (R&D) regime and the annual investment allowance. It has also committed, if elected, to publishing a roadmap for business taxation, setting out its plans over the duration of the next Parliament.

Jeremy Hunt said in a recent interview that tax policies that boost growth will be a priority for a Conservative Government. He said that this includes “business taxes that boost investment”, however he has given no further details on what these policies might be.

To pay for its manifesto pledges, the Liberal Democrats have said they would triple the amount that in-scope companies pay under the Digital Services Tax (currently set at a rate of two percent and potentially subject to removal once new Pillar One rules come into force). The party would also levy a new four percent tax on share buybacks of FTSE 100 listed companies, similar to a policy implemented by President Biden in the US.

Finally, the Liberal Democrat leader Ed Davey has said his party would reverse “the tax cuts the Conservatives have given to big banks”, which is understood to be a reference to the cut in the Bank Surcharge from eight percent to three percent that was announced in the 2023 Spring Budget and was intended to mitigate the impact for banks of the increase in the UK headline corporation tax rate from 19 to 25 percent.

Mr Hunt has so far refused to confirm whether cutting inheritance tax will appear in the Conservative manifesto, despite recently describing the tax as “profoundly anti-Conservative”. He has said that he hopes cutting inheritance tax is “something that over time a Conservative Government would be able to look at”.

The Chancellor has pledged that the Conservatives would not increase Capital Gains Tax (CGT) because “we want to encourage people to earn and to save”.

Mr Hunt recently described Stamp Duty Land Tax as a tax on “aspiration” that was “very distorting”. When asked if he would rule out introducing new taxes on expensive properties, he said “If you are talking about Stamp Duty, then I think if anything we should be going in the opposite direction”.

There has been speculation from the start of the campaign on when Labour might hold its first Budget if it wins the election. Rachel Reeves sought to address this point at an event on 28 May, when she reiterated her previous commitment that she would not deliver a fiscal event without an independent forecast from the Office of Budget Responsibility (OBR), and pointed out that the OBR requires 10 weeks’ notice to produce such forecasts. With a 4 July election date, this would mean a mid-September Budget at the very earliest.

With a month to go before the country goes to the Polls expect many more twists and turns on tax policy from the main political parties. You can now register for our General Election 2024: The Economic and Tax implications of the Manifestos online event on Tuesday 18 June where we will analyse in detail the final commitments made in the parties’ tax manifestos.

For further information please contact:

• Sharon Baynham
• Stefanie Redmond