With the General Election just over a month away,
the contenders are throwing their economic hats into the ring. Although none of
the 3 main parties have provided a manifesto as yet, they have all been giving
their views on tax, spending and reducing the UK deficit. Here is a quick
overview on where the three main parties stand on balancing the UK’s
books.
Liberal Democrats
They plan to increase the amount lower earners
can take home by raising the personal allowance to £11,000 in their first
year of office and then to £12,500 by the end of the term. Whilst
they have not (yet) suggested bringing back the 50p tax rate on incomes
over £150,000 p.a., the closeness of previous votes on the issue means
that this could not be completely ruled out. What is being proposed for the
moment is a 'Mansion Tax', which would essentially work in the same way as
Council Tax but with the funds going to central Government. Additionally the
Liberal Democrats have suggested increasing Capital Gains Tax to 35% (from
28%). This would potentially affect people who own second homes (e.g. buy to
let landlords) as well as those who own other forms of investments such as
shares. Their aim is to have the UK back in the fiscal black by April 2018.
Labour
One of Labour’s headline policies is to reintroduce
the 10p tax rate as a bridge between the nil rate personal allowance and the
20p rate. At current time, they are yet to specify how much income would be
included in this rate. They have stated that the impact on Government finances
could be counterbalanced by withdrawing the Marriage Couples’ Tax Allowance.
Labour plans to reduce the deficit by a combination of ending further borrowing
to finance spending and an increase in various taxes. They have proposed
reintroducing the 50p tax rate on incomes over £150,000 p.a. They also
support a Mansion Tax, although they are yet to explain how specifically, this
would work. On the subject of housing, Labour have made no comment on
Inheritance Tax. Rising house prices have made IHT a reality for
increasing numbers of people. Unless the nil rate is raised at some point in
the future, then the impact of IHT will continue to spread. Labour have also
proposed a tax on banker’s bonuses and (which may prove popular with the
electorate) a 5% pay cut for Government ministers.
Conservatives
The Conservatives plan is essentially to reduce the
deficit by cutting government spending. They too aim to have the UK back in the
black by 2018. They plan to raise the personal allowance to
£12,500 p.a. Likewise the 40% rate would start at £50,000
p.a. (from its present level of £41,900 p.a. Their stated aim is to have
these tax changes in place by the end of the next parliamentary term. While
this would not deliver any short-term improvements to higher-earners, it might
not have an adverse impact on the family finances either. The Conservatives
have not made a commitment to a Mansion Tax and have actively opposed
it in the past. Likewise, while they have not many any pledges on Inheritance
Tax, they have made recent changes to pensions rules from 6th April 2015 which
effectively makes it easier and more tax efficient to pass on pension pots
between generations. It is an open question as to whether or not the
Conservatives will be able to increase the nil-rate band to reflect the impact
of rising house prices. There is no obvious sign that they would seek to
lower the bands.
The political water still remains cloudy......let's
hope they all do what they are meant to and actually firm up on their
policies prior to the voting stations opening......it would help voters after
all!
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