Reform UK Tax Manifesto: Will Farage’s tax milkshake bring all the voters to the yard?

Introduction

Cometh the hour, cometh the tweed.

I was surprised to see that Nigel Farage, the anti-establishment establishment figure, had become leader of Reform UK. Being out of the UK and being spared rolling news, I’m not sure when it happened.

But milkshakes everywhere are now fearing for their safety.

And as we haven’t had the Labour manifesto  (later today) – and the Lib Dem one is as thin as miso soup – I have skipped to the Farage Party.. sorry, Reform UK Party.

Interestingly, it isn’t called a manifesto, it is called a Contract with the People. Sounds a bit woke to me.

It’s also in draft*.

But, being honest, there is some interesting stuff in the Refrom Manifesto / Contract / Back of Farage’s fag packet…

Tax Body Count

Tax is mentioned 62 times.

Income Tax

The main income tax proposal set out in the document is that Reform plan to raise the personal allowance to £20,000. This would represent a significant increase from the current level of £12,570 where it has ossified for the last half decade or so.

Also, significantly, Reform say that they will hike the rate at which the Basic Tax rate (which will remain at 20%). The higher rate (no similar promise that this will remain at the same level) should kick in at £70,000. At the moment, this is a tickle over £50k.

Employment taxes

In a move that would have contractors dancing in the streets, the Party also states that it would finally turn off the life support machine of IR35. However, it says that it will do this “to support sole traders”. I am  not sure the language here is particularly precise.

In addition, they also say they will introduce tax relief for businesses that undertake apprenticeships. However, this isn’t explained any further.

Family taxes

We saw in the Conservative manifesto a pointed nod towards a high profile Labour policy of adding VAT to private school fees. The Tories rules this out and so do Reform.

In addition, Reform go the other day and will introduce tax relief on all independent education. In short, they say, “If parents can afford to pay a bit more, we should incentivise them to choose independent schools”.

Now there’s a battle line if ever I’ve seen one.

Reform also state they want to use the tax system to support marriage through the Tax system. They wish to copy other countries in letting married couples (with children?) share their tax allowance. Although it wouldn’t happen until “finances allow”, we are told that they will introduce a 25% transferable marriage tax allowance.

Of course, they UK tax system took the deliberate step of introducing independent taxation for married couples (and I guess the same for civil partners more recently). Although this might fiscally be an interesting idea, it does perhaps erode that principle.

IHT

In true Farage style, this has been renamed the “Grief Tax”.

But whatever they want to call, they will “abolish” it for estates under £2m. More accurately, I guess this simply means an uprating of the nil rate band – which currently stands at £325k (and may be enhanced by the fiendishly complex, and hyphen heavy, residence-nil-rate-band)

Importantly, in addition, the rate above £2m will be cleaved in half to 20% tax. They say that there will also be the option to donate to charity instead. I am not sure how this plays out with the pre-existing reliefs and mechanisms in this area?

Property tax

Earlier, we were talking about Contractors dancing in the streets. They’re gonna have to make some room for private landlords as we are told that they are going to scrap the interest relief restrictions that were brought in at the end of the last decade. These ridiculous provisions have been taxing phantom profits ever since.

Additionally, like the Tories, Reform will tinker with Stamp Duty Land Tax (“SDLT”).

The promise to cut SDLT to 0% where chargeable consideration is below £750k. Thereafter, it will be 2% for the next £750k (so up to £1.5m) and a rate of 4% where consideration is over £1.5m.

Corporate tax

Although the corporation tax headline rate was increased to 25% a couple of years ago, we had a blast from the past reinstated which was the small companies rate – this meant that those companies with profits below £50k paid CT at 19%.
Reform will lift the minimum profit threshold to £100k.

However, at the same time, they will seemingly reduce the main Corporation Tax Rate from 25% to 20%. If this is immediately, it seems a bit mad to have a rate of 19% and 20%.

Maybe I haven’t read it properly?

We are told that they will then reduce the rate to 15% from year 5. Presumably the rate is to coincide with Pillar 2 and the global minimum tax rate.

We are also told of the plan to abolish Business Rates for high street based small / medium firms. I only mention this because they say they will offset this with Online Delivery Tax. This will be set at 4% for large, multinational enterprises.

VAT

Reform tells us that they will lift the VAT Threshold to £120,000. The problem of the ‘cliff-edge’ also identified by Conservative. However, it does feel that simply raising the rate creates a different cliff edge (albeit it acting as a brake when businesses have grown a little bit). Does it need a more drastic solution?

In a measure perhaps quite close to political home for some of the figures in the party, we are told that they will address the VAT refund scheme for tourist shopping. We are told that this has deterred up to 2 million tourists and cost the UK billions.

Reform will also scrap VAT on energy bills.

Other tax reliefs

In another nod to entrepreneurs we are told that they will “Cut entrepreneur’s tax relief to 5%”. This statement brings me out in hives.

Firstly, I am assuming they mean that they will reduce the effective rate from 10% to 5%.

Secondly, I assume they mean Business Asset Disposal Relief as it was renamed yonks ago.

I am a petty man.

There is also a proposal for “SME Enterprise Zones for left-behind Areas with a period of zero tax for new or existing businesses that are creating jobs.” This looks interesting but is verging on the incoherent.

Perhaps, like the vetting of some of their candidates, they ran out of time?

Green taxes

Unsurprisingly, they will scrap environmental levies.

I assume all of them.

Every last one.

Reform the Tax System

I’ve fallen off my chair.

Stone the crows.

A political party that sets out, in its manifesto (sorry, contract) that it wants to simplify the system. We are told:

Major simplification is needed. At over 21,000 pages, the UK’s tax code is a burden. Hong Kong’s tax code is under 500 pages.

“Nigel, hang on. I’ll bring the matches and the fire-lighters!”

Conclusion

Look, I know its easy to come up with great ideas when you probably don’t have a realistic chance of getting into powers, but I’ve rather enjoyed reading the Reform Party (tax) manifesto… sorry… contract.

It has some bold ideas (missing from the Tories) and perhaps reads as a party of the right in opposition. Hmmm?

I can imagine that the proposed changes in relation to IR35 and so-called Clause 24 will potentially have bought quite a lot of support in two strokes of the pen.

Finally, the ambition to simplify the system is something that should have been on agenda for years. So, a ‘commitment’ to try and bring this to the agenda should be applauded.