Election Tax Pledges
The general election is almost upon us, and it is as difficult to avoid election news and announcements as it is to understand quite what the differences are between the policies of the major parties. Here’s a quick look at how the main parties differ in their commitments on taxation.
The Conservatives have pledged to raise the personal allowance to £12,500 by 2020, up from the current rate of £10,600. They have also pledged to raise the threshold at which people pay the 40% higher rate of income tax to £50,000 (it is currently £42,385). So in effect they are promising to reduce income tax for, well, everyone!
As well as income tax they are also promising to cut Inheritance Tax by increasing the effective threshold for married couples and civil partners to a combined £1 million.
Labour have had quite a lot to say about tax in the run up to this election. Interestingly they haven’t followed the other parties’ in pledging significant increases in the Personal Allowance – instead they are planning on re-introducing the 10% starting rate of income tax. They haven’t given any set figures on this though, so it is impossible to know how this compares with an increase in the personal allowance. Labour are also pledging to restore the 50% rate of income tax for people who are earning more than £150,000 per annum, to work towards the wealthier in society paying their fair share of tax. They are also going to introduce a Mansion Tax on properties worth over £2 million.
Another Labour Party pledge is to abolish the ‘non-domicile’ tax loophole, which allows certain very wealthy individuals living in the UK to, for an annual charge, avoid paying UK taxes on a significant proportion of their income.
On Corporation Tax, Labour have indicated they will ‘reverse the most recent cut to the large company rate of corporation tax’. Over the last few years under the coalition government, the rate of corporation tax for large companies has been falling until in April this year it was aligned with the small company rate of 20%. Labour’s decision means that corporation tax for large companies will go back up to 21%. They will use the extra money raised to reduce business rates for small businesses.
Other tax announcements by Labour include tougher penalties for abusing the tax system, tackling tax avoidance and ending the Conservatives Marriage Tax Allowance. They’ve also said they won’t raise basic or higher rate of income tax or National Insurance, nor will they increase VAT.
The Liberal Democrats want to raise taxes on the rich to ensure they pay their fair share. Like their Conservative coalition partners they have pledged to increase the Personal Allowance to £12,500, and like Labour they are planning a Mansion Tax on properties over £2 million. They’ve also said, “Our plans do not require any increase in the headline rate of Income Tax, National Insurance, VAT or Corporation Tax”. Which is very similar to Labour (for all but Corporation Tax), albeit written in a vague way that doesn’t actually promise anything!
And the others…
The smaller parties, not wanting to feel left out, also have made pledges on tax. UKIP say they will raise the 40% threshold for income tax to £55,000, and introduce an intermediate 30% tax rate for incomes between £43,500 and £55,000. They will also raise the personal tax allowance to at least £13,000 and abolish inheritance tax.
The Green Party have a number of far reaching tax policies, including abolishing the personal allowance (in favour of a ‘citizens income’), abolition of national insurance, a wealth tax for people with net wealth over £3 million, and higher rates of income tax and corporation tax for those with higher incomes/profits.
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