Important information - the value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
Last week we compared the impact on our personal finances and the economy of party proposals as outlined in their election manifestos. Today we focus our attention on their tax proposals. Here, in a summary of manifesto pledges, is how their tax policies compare.
INCOME TAX
In a sentence: Labour would freeze rates, the Tories would do the same but introduce a new tax-free allowance for pensioners; Lib Dems and Reform would raise the tax-free personal allowance for all; Reform would raise the higher-rate threshold, introduce a 25% tax allowance transferable between spouses and make school fees and private healthcare costs tax-deductible. The SNP's manifesto demanded full devolution of tax powers to ensure income tax rates and thresholds for Scotland's 'progressive' system. Scotland has different income tax rates and thresholds to England and Wales which you can read here. Plaid Cymru called for the power to set income tax bands and thresholds in Wales.
The detail
Tories: ‘We will not raise the rate of income tax … From April 2025, we will increase the personal allowance for pensioners by introducing a new age-related personal allowance. This is a tax cut of around £100 for eight million pensioners next year – rising to £275 a year by the end of the Parliament. [We will ensure] that from next year the tax-free personal allowance for pensioners rises by the highest of [rises in] prices, [growth in] earnings or 2.5%, guaranteeing that the new State Pension is always below the tax-free threshold.’
Labour: ‘We will not increase … the basic, higher, or additional rates of Income Tax.’
Lib Dems: ‘Our priority for tax cuts, when the public finances allow, will be to cut income tax by raising the tax-free personal allowance.’
Reform UK: ‘[We will] lift the Income Tax start point to £20,000 per year. This frees up to 7 million people from paying Income Tax and saves every worker almost £1,500 per year. Basic tax rate stays at 20%. The higher rate should begin at £70,000 … [We will] support marriage through the tax system. As soon as finances allow, [we will] introduce a UK 25% transferable marriage tax allowance. This would mean no tax on the first £25,000 of income for either spouse … [We would offer] tax relief of 20% on all independent education … [and] on all private healthcare and insurance.’
NATIONAL INSURANCE
In a sentence: Tories to cut employees’ NI rate to 6%, Labour to freeze the rate, Lib Dems to review and Reform UK to increase employers’ rate for foreign workers to 20%. The Greens would increase the Upper Earnings Limit on NI, imposing the 8% rate on all earnings.
The detail
Tories: ‘Our long-term ambition, when it is affordable to do so, is to keep cutting National Insurance until it’s gone, as part of our plan to make the tax system simpler and fairer. As the next step in that plan, we will cut employee National Insurance to 6% by April 2027 – meaning that we will have halved it from 12% at the beginning of this year, a total tax cut of £1,350 for the average worker on £35,000 … [We will] cut taxes to support the self-employed by abolishing the main rate of self-employed National Insurance entirely by the end of the Parliament … This will not affect their entitlement to the State Pension. This is a massive simplification of the tax system which means that 93% of self-employed people – four million of them – will no longer pay self-employed National Insurance.’
Labour: ‘We will not increase National Insurance.’
Lib Dems: ‘[We will be] reviewing the tax and National Insurance status of employees, dependent contractors and freelancers to ensure fair and comparable treatment.’
Reform UK: ‘The National Insurance rate will be raised to 20% for foreign workers. This would incentivise businesses to employ British citizens whose National Insurance rate would stay at 13.8%.’ The party is referring to the rate paid by employers, not employees.
Plaid Cymru: 'We would investigate increasing higher earners' National Insurance contributions.'
SNP: No detail beyond the call for full tax powers.
VAT
In a sentence: Labour and Tories no rises to main rate; Labour to introduce VAT on school fees; Lib Dems pledge minor changes to VAT on specific services, Reform to scrap VAT on energy bills.
The detail
Tories: ‘We will not raise the rate of VAT … [we will] keep the VAT threshold [for small businesses] under review and explore options to smooth the cliff edge at £90,000.’
Labour: ‘We will not increase VAT … [but] will end the VAT exemption for private schools.’
Lib Dems: ‘[We will be] cutting VAT on public [electric vehicle] charging to 5% … and removing the VAT exemptions for private, first-class and business-class flights.’
Reform UK: ‘[We will] scrap VAT on energy bills … [and] abolish the VAT Tourist Tax. The Government has cost our economy over £10 billion when they stopped the VAT refund scheme for tourist shopping … [We will] lift the VAT threshold [for small businesses] to £150,000 … A national plan is critical for a sustainable social care system. The sector needs … VAT breaks.’
SNP: 'We support the reform of VAT to address the current imbalances and to ensure that life-saving products, like defibrillators, are as accessible and affordable as possible. We would... end the VAT exemption for private schools... [and] introduce a lower rate of VAT for hospitality and tourism sectors, address the imbalance in VAT rates in the construction sector to encourage the refurbishment and retrofitting of existing buildings and remove VAT from on-street electric vehicle charging.'
STAMP DUTY
In a sentence: Tories promise no rate rises and to make first-time-buyer exemption permanent; Labour and Lib Dems pledge higher surcharges for foreign buyers; Reform UK to cut Stamp Duty rates.
The detail
Tories: ‘[We will] permanently abolish Stamp Duty for homes up to £425,000 for first time buyers … and we will not increase the rate or level of Stamp Duty.’
Labour: ‘[We will be] increasing stamp duty on purchases of residential property by non-UK residents by 1%.’
Lib Dems: ‘[We will] give local authorities new powers … 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 UK: [‘We will be] cutting Stamp Duty to 0% below £750k. [We will] cut it to 2% from £750k-£1.5m and cut it to 4% over £1.5m.’
SNP and Plaid Cymru: No mention.
CAPITAL GAINS TAX
In a sentence: Tories no increase in rates and temporary relief for some landlords; Lib Dems to close loopholes; nothing significant from Labour, SNP or Reform.
The detail
Tories: ‘We will not increase Capital Gains Tax … We will maintain Private Residence Relief so that people’s homes are protected from Capital Gains Tax and … we will introduce a two-year temporary Capital Gains Tax relief for landlords who sell to their existing tenants.’
Labour: no significant pledges.
Lib Dems: ‘[We will be] fairly reforming Capital Gains Tax to close loopholes exploited by the super wealthy.’
Greens: '[We will] reform Capital Gains Tax (CGT) to align the rates paid by taxpayers on income and taxable gains.'
Plaid Cymru: '[We will] equalise CGT with income tax, 'raising between £12bn and £15bn.'
SNP and Reform UK: no mention.
INHERITANCE TAX
In a sentence: Tories, Lib Dems, SNP and Plaid Cymru no mention; Labour minor changes; Reform to abolish IHT for estates of less than £2m and cut rate to 20% for those of more than £2m.
The detail
Tories: no mention.
Labour: ‘We will end the use of offshore trusts to avoid Inheritance Tax.’
Lib Dems: no mention.
Reform UK: ‘[We will] abolish Inheritance Tax for all estates under £2m. That means some 98% of all estates. The rate above £2m will be 20% tax, with the option to donate to charity instead.’
FUEL DUTY FOR DRIVERS
In a sentence: Tories, Labour and SNP no mention; Lib Dems to help rural drivers; Reform to cut by 20p a litre.
The detail
Tories: no mention.
Labour: no mention.
Lib Dems: ‘[We will] help motorists in rural areas who face higher fuel costs by expanding Rural Fuel Duty Relief.’
Reform UK: ‘[We will] lower fuel duty by 20p per litre.’
Plaid Cymru: '[Calling] for a reconfiguration of the Rural Fuel Duty Relief Scheme... [to take] into account access to local public transport networks, and a guarantee of inclusion of Welsh areas within the scheme. We have also supported it being doubled to 10p per litre.'
TAXES ON PENSIONS
In a sentence: Tories no change to pension tax breaks and no NI on pension contributions; others no mention.
The detail
Tories: ‘Under our new Pensions Tax Guarantee, the Conservatives will not introduce any new taxes on pensions. We will maintain the 25% tax free lump sum and maintain tax relief on pension contributions at their marginal rate. We will not extend National Insurance to employer pension contributions.’
SNP: '[We would] maintain the triple lock and move to deliver a wellbeing pension. We oppose any further increases in the state pension age.'
Labour: no mention.
Lib Dems: no mention.
Reform UK: no mention.
GREEN LEVIES
In a sentence: Tories no new green taxes; Labour windfall tax on oil and gas profits; Lib Dems reform to flight taxes; Reform UK to scrap energy levies and ban ULEZ zones; Greens to increase taxes on oil and gas companies to pay for greening the economy.
The detail
Tories: ‘[We will be] guaranteeing no new green levies or charges while accelerating the rollout of renewables … alongside our commitment not to introduce road pricing schemes, we will also rule out any frequent flyer levy … A Conservative government will not introduce pay per mile road pricing and will ban mayors and local councils from doing so.’
Labour: ‘[We will introduce] a time-limited windfall tax on the oil and gas giants making record profits.’
Lib Dems: ‘[We will be] reforming the taxation of international flights to focus on those who fly the most, while reducing costs for ordinary households who take one or two international return flights per year … [We will be] introducing a new super tax on private jet flights.’ VAT changes to air fares as mentioned above.
Reform UK: ‘[We will] scrap energy levies [and] legislate to ban ULEZ clean air zones.’
Greens: '[We will] remove all oil and gas subsidies and introduce a carbon tax on all fossil fuel and domestic extraction.'
OTHER
In a sentence: Tories to retain tax incentives on investments such as Venture Capital Trusts (VCTs); Labour to scrap non-dom status; Reform to scrap TV licence fee.
The detail
Tories: ‘[We will] retain key tax incentives that encourage small businesses to grow, including the Enterprise Investment Scheme, Seed Enterprise Investment Scheme, Venture Capital Trusts, Business Asset Disposal Relief, Agricultural Property Relief and Business Relief.’
Labour: ‘We will abolish non-dom status once and for all, replacing it with a modern scheme for people genuinely in the country for a short period.’
Plaid Cymru: 'We... support introducing a Wealth Tax. We would crack down on tax evasion and avoidance, and abolish loopholes for non-doms.'
Reform UK: ‘The TV licence is taxation without representation. We will scrap it.’
Greens: '[We would introduce] a Wealth Tax of 1% annually on assets above £10m and of 2% on assets above £1bn.'
All quotes are taken directly from the parties’ manifestos
Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.
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