With the 2024 General Election taking place on Thursday 4 July, you may be feeling overwhelmed with all the media coverage of the main parties’ key pledges. If so, read our easy-to-understand summary of some of the key manifesto pledges for taxation, pensions, housing and social care.
Please note, the following is not an extensive summary of the promises made by all the political parties. If you are looking for more information on the pledges, please visit the websites of each party and view their manifesto.
Taxation
In January of 2024 and again in the Spring Budget in April, Tory chancellor Jeremy Hunt cut National Insurance Contributions (NICs). In 2024/25, the main rate of NICs for employed people dropped to 8% for those earning between £12,570 and £50,270 and 6% for self-employed people in the same earnings band.
Yet the Tories have pledged to cut NICs even further for employed earners by 2027, which would take it down to 6% for basic-rate taxpayers. That said, the Tories have not pledged to remove the freeze tax’s thresholds, which were frozen until April 2028 by Mr Hunt.
This means the personal allowance – which is the amount you can normally earn without being liable to Income Tax – is likely to remain at £12,570 until then if the Conservatives are re-elected. Furthermore, the threshold for the 40% higher-rate tax band is likely to stay at £50,270 and the 45% additional-rate threshold will remain frozen at £125,140.
The Liberal Democrats, on the other hand, has said it wants to cut Income Tax by raising the Personal Allowance when the public finances ‘allow’. The party also wants to change Capital Gains Tax (CGT) to fund investment in the NHS and social care.
This again is at odds to the Tories, which has pledged not to raise CGT. The Conservatives have also said that it would not increase Stamp Duty, Capital Gains Tax or Corporation Tax.
Labour has said that it would not increase Income Tax, NICs, VAT or the main rate of Corporation Tax if it’s elected. In 2024/25, the main rate of Corporation Tax is 25%. Sir Kier Starmer’s party has also stated that it will not remove the freeze on tax thresholds, meaning millions of workers could still face an increased Income Tax liability if either the Tories or Labour win the election.
Labour has also pledged to remove tax exemptions from private schools, which could result in VAT being added to school fees. The party has also said it would get rid of the current business rates system and replace it with something that’s more supportive to businesses.
The biggest change to your tax bill may happen if Reform UK win the day on 4 July, as it has vowed to raise the Personal Allowance threshold from £12,570 to £20,000. It also wants to see the 40% higher rate tax to come into force at £70,000, instead of the current threshold of £50,270.
Reform UK also wants to simplify the tax system in the UK and scrap Inheritance Tax (IHT) on estates valued at less than £2 million. Furthermore, it would like to drop the IHT charge from 40% to 20% and slash Corporation Tax to 20%. It’s also said it will drop the latter to 15% before the end of its five-year term if it’s elected.
Pension
The Conservatives have pledged to introduce the ‘pensions triple lock plus’, which it says would ensure the State Pension never becomes liable to Income Tax. This is because the initiative will increase the Personal Allowance every year with the triple lock, which will prevent the benefit from exceeding the allowance and becoming liable to the tax.
The Office for Budget Responsibility estimates the triple lock will push the State Pension above the Personal Allowance by 2027 if nothing is done to prevent it. Under its ‘pension tax guarantee’, the Conservatives have promised that tax-free lump sums, and tax relief on contributions, will continue.
Labour leader Sir Keir Starmer had already pledged to maintain the triple lock, however the party has stated that it will not follow the Tories and introduce the ‘triple lock plus’. While the party’s 2024 manifesto did not mention the Lifetime Allowance, media reports in June suggested the party will not reinstate it as had been previously suggested.
The allowance, which was scrapped in April 2023, meant that those with a pension worth more than £1,073,100 faced a significant tax charge on withdrawals that exceeded this level.
Like Labour, the Lib Dems have vowed to maintain the triple lock and has also promised to help WASPI women, which stands for Women Against State Pension Inequality. These are females born in the 1950s that have been adversely affected by State Pension Age changing from 60 to 65.
Housing
The Tory manifesto included pledges to help first-time buyers get onto the property ladder. This includes a promise to retain the temporary Stamp Duty holiday on homes worth up to £425,000 for first-time buyers.
Additionally, the party proposed a new Help to Buy equity loan scheme, which offers up to 20% towards the cost of new build homes. As a result, buyers will only need a deposit of 5%.
Labour has promised to end no fault evictions for renters, raise standards of rental homes and allow tenants to challenge unreasonable rent increases. It also wants to enhance regulations to ensure more affordable homes are built and first-time buyers are given priority over foreign purchasers to buy homes in new developments.
Social Care
The Conservative manifesto suggests there may be progress on capping the cost of social care. Under its manifesto, the Tories would go ahead with the social care reform of 2019 and limit the lifetime amount people pay for care to £86,000.
A more generous means test could also be introduced that may see those with assets of below £100,000 get help with care costs. Currently, if you have assets above £23,250, you won’t receive financial help with care costs.
Reform UK has pledged to oversee a Royal Commission inquiry into how to improve the social care system. Labour has committed to major reforms in adult social care, which includes the creation of a National Care Service. However, its manifesto provides little detail on how it would implement or fund the reforms.
Get in touch
Whoever wins the next election, their policies may have implications for your wealth and the amount of tax it’s potentially exposed to. That’s why it’s so important to speak to a financial adviser to ensure your pension, investments, money and other assets are as tax-efficient as possible.
Additionally, an adviser could help you prepare financially for any future care need you may have, and expose your wealth to greater growth potential. If you would like to discuss this further, please contact us on 01527 577775 or please feel free to speak to one of our advisers as we’d be happy to help.
Friday 21 June 2024