General election 2024 - comparing party manifestos

InsightsGeneral election 2024 - we have a new government

General election 2024 - comparing party manifestos

27 June 2024
On 4 July, the country will go to the polls to decide the next Government. As expected, the economy, taxes and pensions were mentioned in all party manifestos and with big changes such as Labour’s pledge to introduce the Lifetime Allowance now revoked, there was little surprise from the leading parties.

In May, the IMF warned the UK Government against providing additional tax cuts, unless they are credibly growth-enhancing and appropriately offset by high-quality deficit-reducing measures. Some parties have already made the pledge to increase taxes, while others are hoping for growth in the UK economy to increase the overall take for them, or greater efficiencies in public services to reduce costs. What strikes us is that there is a real possibility we could see changes to the tax landscape, even above what is stated in the manifestos. It is therefore important that any planning is done in a way that is diversified against any one strategy and can be changed if needed.

The key policies from each Party’s manifesto are covered below, but we’ve noted here some particular areas to keep an eye on:

  • Inheritance Tax (IHT) is one of the smallest contributors to the UK tax-take. It’s described as an optional tax because you can choose to give away assets to save the tax. IHT has been reviewed by the Office of Tax Simplification (OTS) and in its 2019 review suggested that the Capital Gains Tax (CGT) uplift on death could be removed for assets that qualify for relief from IHT. Where the CGT uplift is given (as currently) on assets subject to IHT (whether relieved from IHT or not), there is an incentive not to sell certain assets until after death, potentially creating capital allocation inefficiencies.
  • Pension taxation went through a significant reform last year, with the removal of the Lifetime Allowance (LTA). When this was announced, it was with the proviso that pensions are instead going to be taxed on death, with the introduction of the Lump Sum & Death Benefit Allowance. However, beneficiaries of many pension death benefit funds have the option of retaining the funds in a beneficiary pension, only paying tax when they draw from the fund. We wouldn’t be surprised if the rules were changed to crystallise the tax charge on death, rather than being able to defer tax until drawdown, which in certain situations (for example non-UK residence) may not result in any UK tax (unless there is a civil service pension).
  • The major parties have pledged not to increase income tax, but we’ve seen an increase in tax paid by the fixing of the thresholds and an increase in incomes through inflationary pressures. While we may not see an increase in the headline rate, we have certainly seen more people paying tax.

The key policies from each Party’s manifesto

The economy

  • The Conservatives have committed to keeping public sector borrowing below 3% of GDP by the end of the next parliament in 2029/2030.
  • Labour will create a £7.3bn National Wealth Fund to invest in greener energy solutions and plan to create a publicly owned clean power company, Great British Energy, which they say will be funded by windfall tax on oil and gas companies. As contracts expire, Labour will also nationalise the rail network, bringing it under public ownership.  
  • The Liberal Democrats will work on the trading relationship with Europe, and develop an industrial strategy focused on the skills the future UK economy will need, from the renewables industry to the digital and bioscience sectors.  They will finance this by raising taxes on big banks and a one-off windfall tax on the super profits of oil and gas producers and traders.
  • The Green party has promised £40bn a year for green investment. They will also introduce a carbon tax to accelerate the green transition and nationalisation of rail, water and five big energy companies.
  • Finally, Reform plans for the economy are focused on tax.  As an example, they plan to scrap net-zero spending claiming this would save over £30bn a year for the next 25 years.

Income Tax

  • Under the Conservatives, Income Tax thresholds will be frozen until 2028.
  • Labour have pledged that they will not raise the rate of Income Tax.
  • The Liberal Democrats, plan to reduce Income Tax by raising the personal allowance when the public finances allow, however, there has been no confirmation yet as to changes to the reduced personal allowance for those earning over £100k.
  • Reform has pledged a £20,000 Income tax Threshold and will increase the higher rate threshold from £50000 to £70,000.
  • The SNP have not ruled out further changes to Income Tax, with Scotland having six Income Tax bands at present.

Capital Gains Tax

  • The Conservatives have pledged that Capital Gains Tax (CGT) rates will remain at their current level with no further increase.
  • Labour has kept coy on their plans for CGT having left it out of their manifesto pledge altogether.
  • The Liberal Democrats on the other hand will look to overhaul CGT by introducing three distinct rates of CGT, similar to Income Tax: 20% (for gains up to £50,000), 40% (between £50,000 and £100,000) and 45% (over £100,000). CGT rate would be based solely on gains.
  • Under the Liberal Democrats, the CGT-free allowance would go up from £3,000 to £5,000, and they would introduce a new “inflation allowance” so that any gains that are purely the result of inflation are not taxed at all.
  • The Greens will align CGT rates with Income Tax.

Inheritance Tax

  • Inheritance Tax (IHT) has not been mentioned in either of the main party manifestos however, it is anticipated that Labour will look at IHT as part of wider taxation considerations.
  • The Liberal Democrats have pledged to close the tax loopholes with IHT too if elected.

Stamp Duty and property taxation

  • Under a Conservative Government, the threshold for first-time buyer Stamp Duty is to be frozen at £425,000 up from £300,000, which was a temporary increase currently due to end on 31 March 2025. They will also introduce a new help to buy scheme.  The conservatives would introduce a temporary two-year CGT relief for landlords who sell their properties to tenants.
  • Labour will increase the Stamp Duty surcharge for non-UK residents from 2% to 3%. They will also support struggling first-time buyers with a new mortgage guarantee scheme.
  • The Liberal Democrats will give local authorities new powers to control second homes and short-term lets in their areas by allowing them to increase council tax by up to 500% where homes are being bought as second homes, with a Stamp Duty surcharge on overseas residents purchasing such properties. 
  • Reform has pledged to reverse the 2019 tax changes that made buy to let properties less attractive to landlords.

Pensions

  • The Triple Lock will remain under a Conservative government which has now introduced a Quadruple Lock, meaning a pensioner's tax-free personal allowance will also rise in line with the highest of interest rates, prices or 2.5%. Tax relief on pension contributions will remain at the taxpayer's marginal tax rate and the 25% tax-free lump sum on pension drawdown will remain.
  • Labour has also fallen into line with the Conservatives on the triple lock and will increase the state pension by the highest of inflation, average earnings or 2.5%.  Despite pledging to reinstate the Lifetime Allowance, Labour has now backtracked but has said they will review the pension landscape if they are elected.
  • Similar to the Conservatives and Labour, the Liberal Democrats will protect the Triple Lock so that pensions will rise in line with inflation, average earnings or 2.5%. The Liberal Democrats are the only party to commit to closing the gender pension gap. The party have also vowed that women penalised by the equalisation of the pension age for men and women are compensated.

Non-domicile rules

  • It is anticipated that the UK’s non-domicile regime will be replaced with one that's residency-based. How this new regime will be implemented and governed is still up for debate and we probably won’t know until after 4 July.
  • We do know that Labour will look to close what they call ‘the tax loopholes’ surrounding non-domiciles including preventing the use of offshore trusts to mitigate UK IHT.

National Insurance

  • Under the Conservatives, National Insurance (NI) will be cut by a further 2% to 6% with a long-term plan to end NI altogether. Self-employed will see Class 4 NI abolished.
  • The Greens pledge to charge the basic 8% NI rate on income above what’s called the Upper Earnings Limit.

Business Taxes

  • There will be no increase in Corporate Tax under the Conservatives.
  • Labour focused on the need for stability in the business tax environment.  Labour will cap the main rate of Corporation Tax at the current 25% through the next five years.
  • Both Labour and Conservatives have committed to retaining permanent expensing and the Conservatives plan to extend it to leasing when fiscal conditions allow.
  • Labour has committed to publishing a business tax road map within 6 months of taking office.
  • The Liberal Democrats have pledged they will make the case for increasing the global minimum rate of Corporation Tax to 21%. It’s assumed this refers to the current global minimum tax (set at 15%) under the Pillar Two rules.
  • In respect of oil and gas companies Labour plans to close loopholes in the windfall tax on oil and gas companies and extend the sunset clause in the energy profit levy until the end of the next parliament.  They also plan to increase the levy by 3%.
  • The Liberal Democrats have committed to implementing a “proper” one-off windfall tax on super profits of oil and gas producers and traders, and to increase the bank surcharge rates on large banks.  They will also increase the rate of digital services tax from 2% to 6%.  There is no mention of what would happen if there is a global agreement on Pillar 1, where the UK has previously agreed to withdraw its digital service tax when Pillar 1 applies.

VAT

  • Under the Conservatives, VAT will be frozen until 2028. They have also pledged to explore options to smooth the cliff edge for those required to register for VAT when turnover reaches £90,000. 
  • Labour will also freeze VAT rates with one of Labour’s biggest pledges that VAT and business rates will be applied to private school fees. 

Get in touch

If you have any questions regarding the policies proposed by the parties, or would like to know about any planning considerations please do not hesitate to get in touch.

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