The polls show the race between the main parties has tightened since the general election was called, so the result could be no clear majority for one party, leading to some trade-offs.
We have covered the Labour party tax and business policies and their controversial plan to outlaw certain types of umbrella employment companies. The Conservative manifesto walked a tightrope between investment and lower tax rates, while the Liberal Democrats concentrated on Brexit issues.
If there is a hung Parliament there will certainly be some compromises to be made on tax policies. I have compared the published positions on the key tax issues below. If the view of the party is not mentioned, that is because I can’t find a reference to it in their manifesto.
The Lib Dems advocate a 1% rise in all income tax rates to raise £6bn for the NHS and social care services. The Scottish Nationalist Party would support an increase in the top rate of income tax from 45% to 50% on incomes more than £150,000, but only on a UK-wide basis as they fear tax avoidance if that higher rate only applies to Scottish residents. The SNP also want a new tax on banker’s bonuses, but don’t specify if that will be on a UK-wide basis as well.
UKIP want to raise the 40% threshold to £55,000 and restore the personal allowance to those earning more than £100,000. The Conservatives promise to take the 40% threshold to £50,000 by 2020 and the personal allowance to £12,500 by the same date. The Labour Party will introduce a new income tax band at £80,000, but it is not clear what tax rate will apply from that point.
The SNP opposes further cuts in corporation tax, but doesn’t mention any increases. The Labour Party has said it will take the main rate of corporation tax back to 26% over the next decade and reintroduce the 21% rate for small companies. The Green Party plan to increase corporation tax to 28% for large companies, and presumably (not stated) reintroduce a lower rate of CT for small companies. The Lib Dems want to restore the rate of CT to 20%.
The Conservatives reiterate their plan to reduce corporation tax in the rest of the UK to 17% by 2020. They also continue with their stated aim to devolve corporation tax raising powers to Northern Ireland, but not to Scotland. Plaid Cymru (Welsh Nationalist) want to be able to set their own corporation tax rates in Wales.
The SNP wants to phase in Making Tax Digital quarterly reporting over a five year period, and will consider calls for exemptions for unincorporated businesses and those who are not VAT registered. In contrast the Labour Party says it will exclude small businesses from MTD quarterly reporting, but it doesn’t define what it means by a small business.
The Green Party would remove the upper cap on employee’s NIC, so that the wealthiest pay more. The Labour Party and the SNP both promise no increases in the personal rates of NIC.
The Conservatives plan to introduce another one year employer’s NIC holiday for businesses who take on ex-service personnel. A similar NIC holiday policy was not a great success when it was implemented for new businesses outside southern England.
The SNP and UKIP both oppose increases in the rates of VAT and insurance premium tax. Following Brexit the UK would be free to set its own VAT rates, and even replace that tax completely. UKIP would remove VAT from a range of goods and services, including hot take-away food, domestic fuel and energy bills. The SNP and Plaid Cymru want to support the tourism industry by reducing VAT in the hospitality sector.
The Labour Party would extend VAT to private school fees, presumably at the standard rate, but this is not specified. The Conservatives promise not to increase the level of VAT but don’t mention the scope.
The Greens want to reform inheritance tax so the rate is determined by the wealth of the recipient not as at present, the value of the deceased’s estate. UKIP want to raise the IHT nil rate band to £500,000, and eventually eliminate this tax altogether.
The Lib Dems and Labour say they will reverse the increase in the IHT threshold – this presumably refers to the new residential nil rate band, but that is not clear in either manifesto.
About Rebecca Cave
Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.