Tax calculator: how the Conservatives’ tax proposals affect you

Boris Johnson with the Conservative party manifesto © Hollie Adams/Bloomberg via Getty Images

 

Nimesh Shah, partner at accountants and tax consultants Blick Rothenberg, outlines the proposals in the Conservative manifesto for personal, business and property taxes, and explains how they might affect you.

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The Conservative Party has, not surprisingly, taken a cautious approach. There is little change to personal taxes (although there remains the possibility of increased National Insurance contributions for high-earners); a halt to further corporation tax cuts; some relief for small businesses; and increased property taxes for foreign buyers. More radical measures could be taken if they secure a majority at the general election, however.

Personal taxes

The Conservative manifesto was fairly light on announcements to tax, with the only noteworthy announcement being an £868 increase to the National Insurance primary threshold to £9,500. This will provide an annual £104 tax cut across the board for workers. The Conservatives’ ambition is to increase the threshold to £12,500, which would align to the current personal allowance, and provide an annual tax cut of £464. The manifesto suggests that the threshold will increase over the next four years, but it’s not clear whether it will keep pace with the personal allowance. The measure is estimated to cost the Treasury £2.5 billion in 2023/24.

The Conservatives have pledged no increases to income tax, National Insurance contributions (NIC) and VAT under their “Triple Tax Lock”. However, given the significant spending pledges, I would expect to see an indirect change to at least one of these taxes to deliver the much-needed revenue to the Treasury. It could be possible for a future government to limit the benefit of the NIC threshold increase by introducing a tapering for higher earners, much like how the personal allowance is reduced when a person’s income is above £100,000. If something like this is introduced, it could mean a NIC increase of up to £1,500 for higher earners.

Most significantly, the Conservative manifesto made no mention of Boris Johnson’s leadership pledge to increase the basic rate income tax band to £80,000. This measure would have given a tax cut of up to £6,000 but was estimated to cost the Treasury around £8bn. The proposal appears to have been dropped completely, and it’s difficult to now see if this measure will ever be introduced.

Businesses taxes

Businesses do not appear to face any tax increases, unlike the proposals announced in the Labour and Liberal Democrat manifestos. As announced last week, companies will not benefit from the further reduction to corporation tax to 17% from April 2020 and the rate will remain at the current 19%.

However, in the detail of the Conservative manifesto, they propose to increase the Employment Allowance for small businesses – this is currently worth £3,000 in National Insurance savings for employers, but the manifesto does not provide any detail on the proposed increased. In addition, the research & development tax credit would increase to 13% and there will be a review on the definition of “research & development” to allow potentially more expenditure to qualify. These business measures are estimated to cost £800 million in 2023/24.

Possibly in reaction to Labour’s proposal to abolish Entrepreneurs’ Relief, the Conservative manifesto proposes a review of the relief, citing that “some measures haven’t fully delivered on their objectives”. It is disappointing that the main parties have reacted to the recent negative suggestions around the valuable relief, which is considered to be a cornerstone of the UK’s entrepreneurial system and highly valued by business owners.

Property taxes

On property taxation, another already-announced proposal to introduce a 3% stamp duty land tax (SDLT) surcharge on non-UK residents purchasing UK residential property is the only policy of note.

Foreign buyers would face an SDLT charge of up to 18% when purchasing UK residential property, but the rate for commercial property remains unchanged; the top rate applying to commercial property is 5%. The foreign-buyer SDLT surcharge is estimated to raise £120m. The policy is unlikely to be an overall vote winner, but it creates yet another factor in the already cluttered SDLT system.

Overall, the Conservative manifesto proposals are fairly static, and it remains to be seen if more significant and radical policies will be introduced at a Budget following the general election, should the Conservatives gain a working majority. After all, the incumbent chancellor has proclaimed himself a “low tax guy” striving to simplify the UK’s tax system. For now, it would appear that Conservatives have been very prudent in their policies when compared to their rivals, opting for a more cautious strategy in their manifesto.

Tax calculator: see how each party’s plans affect you

Just type your salary into the calculator below from leading accounting and tax advisory firm Blick Rothenberg to see how much better or worse off you’ll be under each party’s plans.