The dust has settled and new Prime Minister, Sir Keir Starmer, has moved into No. 10, but with so many claims and counterclaims made by all political parties in the run-up to the General Election, it may be difficult to recall exactly what was contained in Labour’s manifesto concerning taxation. Here we provide a brief summary of the main measures that we currently know about.
As we know, Labour’s manifesto highlighted targeted tax hikes, aimed squarely at wealthier voters. These measures include:
• closing of non-dom tax loopholes;
• VAT and business rates applied to private schools;
• private equity bosses will lose their ‘carried interest’ loophole.
The Labour manifesto proposes to cap corporation tax at the current 25% rate through the next five years. Permanent capital allowances full expensing will be retained and there is a commitment to maintain the £1m Annual Investment Allowance (AIA), which should help provide businesses considering making investments with some certainty. It also promised to publish a business tax ‘road map’ for the next Parliament, which we can expect within the next six months. Again, businesses will welcome any degree of certainty that this will offer. The manifesto stated:
‘The business tax regime matters for investors. It is not just the rates of tax that matter, but also certainty. Under the Conservatives there has been constant chopping and changing – corporation tax has changed 26 times – and multiple fiscal events have made drastic changes often at little notice.’
Labour proposes replacing the current business rates system to create a more level playing field with ‘giant online retailers’. Details have not yet been published, but it seems likely that a consultation will be launched on this subject in due course. The manifesto stated:
‘The current business rates system disincentivises investment, creates uncertainty and places an undue burden on our high streets. In England, Labour will replace the business rates system, so we can raise the same revenue but in a fairer way. This new system will level the playing field between the high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship.’
Regarding research and development (R&D), there has been no mention of changes to R&D reliefs for corporate investment, which will be welcome news given the recent reform of the current regime.
The manifesto promises that a £1.2bn windfall tax on oil and gas companies will part-fund Great British Energy, a publicly-owned clean power company.
Labour has ruled out income tax, National Insurance and VAT increases, but has not made the same promise on CGT. There is no commitment either on pension tax relief although the earlier stated intent to reintroduce the lifetime allowance has not been included in the manifesto.
The Labour party intends to increase the stamp duty land tax (SDLT) surcharge applied when overseas nationals buy UK residential property, taking the surcharge to 3%.
On the National Minimum Wage (NMW), Labour has pledged to remove age bands so that there is only one rate. The remit of the Low Pay Commission will also be changed to ensure that ‘the minimum wage is a genuine living wage’.
There has been no mention of changes to the inheritance tax regime (IHT). However, it has been reported that Labour is currently looking at options. This might include scrapping or changing the rules for Business Relief and Agricultural Relief. It is also rumoured that similar changes may be made to lifetime gifts, where currently no IHT is due where a person lives for more than seven years after making a gift.
Labour says it is committed to one major fiscal event a year, designed to give families and businesses due warning of tax and spending policies. No doubt the first of these events will contain plenty to keep everyone on their toes in the next few years.
WatkinsonBlack have considerable experience in all areas of taxation and business services. This includes providing a very cost-effective payroll bureau service, as well as assisting to ensure compliance with the latest Making Tax Digital legislation, including the Basis Period Changes. If you are employed or self-employed either as a sole trader, partnership or limited company, or are subject to self-assessment due to rental or other untaxed income, and want to arrange a no-obligation initial meeting on any taxation or accounting matter then please contact us by telephone on 01925 413210 or by e-mail to [email protected]
Please note that these ideas are intended to inform rather than advise and you should always obtain professional advice before taking any action.
