Labour’s tax proposals and what they mean for your money
Nimesh Shah, partner at accountants and tax consultants Blick Rothenberg, outlines the Labour Party's tax proposals, and explains how they might affect you.
Nimesh Shah, partner at accountants and tax consultants Blick Rothenberg, looks at what the Liberal Democrats propose to do about tax, and explains how it might affect you.
The Liberal Democrats proposes fund its ambitious spending plan by increasing personal taxes for everyone and levying higher taxes on businesses.
The manifesto includes a summary of costings, showing that by 2024/25 there will be an extra £63bn of spending, funded by taxes and the "Remain bonus".
Personal taxes
The headline tax measure is a 1p increase in income tax, at all rates (basic, higher and additional) which raises £7.7bn in 2024-2025 and will be ring-fenced to be spent on the NHS and social care. The revenue will be neither levied nor spent in Scotland.
The separate capital gains tax-free allowance will be abolished, raising a further £5.7bn. Whilst it may seem unfair that those with capital gains get a separate allowance (on top of the personal income tax allowance, currently £12,500) and so abolishing it seems an easy measure to raise revenue, it will have an effect on those with smaller gains for example, from share schemes in relatively small businesses and is likely to mean that many more people have to complete a self-assessment tax return. Retaining the allowance, perhaps at a lower level, could be a simpler measure.
The other personal tax measure is the abolition of the marriage tax allowance, but the fact that this is only predicted to raise £630m illustrates how small, and relatively complex, this allowance is.
"Green" taxes
Individuals will also be affected by the proposal to reform air passenger duty, raising almost £5bn, by levying much higher charges on those who are the most frequent flyers. This is part of an ambitious "green agenda", with a clear move towards much lower emissions targets.
However, one item not mentioned is any increase in fuel duty some years ago, Parliament committed to increasing the rate of fuel duty in line with inflation, but in practice the level of duty has been frozen since 2011. The projected increase is still included in the Office for Budget Responsibility's (OBR) baseline forecasts, and it is therefore likely that fuel duties would rise under the Liberal Democrats meaning that petrol prices will go up.
Business taxes
The business tax measures include a rise in corporation tax to 20% (compared to the Conservative Party proposal of 19%, and Labour's 26%), which would take it back up to the rate it was at prior to 2017.
But there is also a proposal to raise a further £5.7bn from anti-avoidance measures, and to triple the proposed Digital Services Tax from 2% to 6%, raising a further £1bn. Both of these proposals are likely to be difficult to implement, and may well not raise as much as anticipated for example, the total HMRC Tax Gap figure for avoidance in 2017/18 was only £1.8bn.
The manifesto is silent on any possible changes to inheritance tax (IHT) or entrepreneur's relief, both of which have received significant attention elsewhere.
Overall, the manifesto sets out ambitious spending plans, with a clear summary of where most of the money will come from with higher taxes on both individuals and companies.
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.
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