Conservative Tax Manifesto: Fiscal Flotsam and Jetsam?

Introduction

Anglo Saxon ruler, King Cnut, says the myth, sat on the beach and ordered the tide not to come in.

Of course, the image of a man facing the absolute inevitable is fitting in election year 2024.

However, in contrast with the Viking warrior, Rishi didn’t spend too much time on beaches of Normandy this weekend. Whether it was because he didn’t like to politicise his job as a politician, or didn’t want to get sand in his brogues we simply don’t know.

Let’s hope that M(anifesto) Day goes better than the D-Day celebrations.

So, let’s have a rummage about and see what tax stuff we can find in the the Tory manifesto…

 

Tax Body Count

Tax or Taxes is mentioned 88 times.

National Insurance is mentioned 15 times

Inheritance Tax, which at one point seemed so very important, surprisingly, doesn’t seem to get a mention at all.

Income Tax

We are told, with a straight-face, that since 2010, they have nearly doubled the personal allowance it from £6,475 to £12,570 [The manifesto says £12,750, which seems a transposition error?]

WTF?

It was £12,500 on 6 April 2019. One of the anchors – along with other frozen thresholds – together constituting the great revenue raising lever that is fiscal drag.

We will also not raise the rate of income tax.

Employment taxes

We are told that,  if they are elected, the Conservatives would cut tax for workers by reducing employee National Insurance to 6% by April 2027.

In addition, they will abolish the main rate of self-employed National Insurance entirely by the end of the Parliament.

Pensioners

Pensioners are presented with a new word salad of Triple Lock… Plus… with, err, a Cherry on top.

OK, hold the cherry for now.

We are told that both the State Pension and the tax free allowance for pensioners will always rise with the higher of inflation, earnings or 2.5%.

From April 2025, a new age-related personal allowance will be introduced.

Great news for pensioners. Unless they’d been relying on the CGT Annual Exemption to supplement their income. Now been decimated.

Family taxes

We are told that they will legislate against the unfairness (introduced in 2013 when the Tories were in Gov) of the High Income Child Benefit Charge (“HICBC”).

HICBC is a tax charge (through self-assessment) which acts to claw back claims where you or your partner’s individual income is over £60k (as of April 2024, previously £50k) and you claim Child Benefit.

The charge is 1% of your total Child Benefit received for every £100 of your adjusted net income that goes above £60k

The manifesto proposal is that Child Benefit moves to a household system, so families don’t start losing Child Benefit until their combined income reaches £120,000.

I guess this would be welcomed by many families.

If nothing else, this will raise a breath of relief from the tribunals who have been inundated over the last few years trying to make sense of HMRC’s efforts to enforce this bonkers tax.

 

Capital Gains Tax

We are told that they will not raise Capital Gains Tax.

I talk about the new mad proposal for landlords below.

Property tax

We are told that they will effectively introduce a permanent version of First Time Buyer’s Relief for SDLT purposes. This means that there will be a rate of 0% for those that qualify up to £425k.

If it follows the previous version of the relief, then there might be a cap of, say, £625k. Between these two amounts then SDLT is 5%.

Where the price paid for the property is above £625k then it is likely then no relief is available.

Of course, the relief might look quite different – but don’t under-estimate the draftsman’s preference for dredging up old reliefs.

Oddly, they also plan to introduce a two-year temporary CGT exemption for landlords. This will apply where they sell properties to their existing tenants. I would imagine that this will be tightly policed by the draftsman.

This comes hot on the heals of the drop in the highest rate of CGT for residential property from 28% to 24%. Clearly, Jeremy is looking to offload some of his portfolio…

Corporate tax

We are told that there will not be a rise in corporation tax rates.

VAT

We are told that there will be no increases and no VAT on private school fees.

In addition, we are told that they will keep the VAT threshold under review and explore options to deal with the cliff edge requirement to register for VAT at £90k.

Other tax reliefs

Next, we are told that they plan to retain key tax incentives that encourage small businesses to grow, including:

• Enterprise Investment Scheme,
• Seed Enterprise Investment Scheme,
• Venture Capital Trusts,
• Business Asset Disposal Relief,
• Agricultural Property Relief and
• Business Relief.

Of course, this does not mean they will not be tweaked or revised. I think there is plenty of scope for this to happen.

In addition, we are told that they will ensure our creative sector tax incentives remain competitive

Tax avoidance and other monkey business

Ah yes. The magic money tree that will pay for all of this,  the clamping down on tax avoidance.

It is difficult to see how HMRC will Raise a further £6 billion a year from tackling tax avoidance and evasion by the end of the Parliament.

We aren’t really told how.

Conclusion

So there we are.

Not much to get excited about. The Government will seemingly allow the stealth taxes and fiscal drag already baked into the system do the hard work…

… and let cracking down on tax avoidance do the imaginary work.

I think the tide has finally washed in for this Government.