General Election 2024: Conservative tax policy

The manifesto does not contain much in the way of tax surprises. This might be expected from the governing party over the last 14 years which could also control the timing of the election and any policies trailed in the run up to it.

Many of the tax pledges from the manifesto are focussed on keeping existing reliefs and rates, with a view to continue cutting taxes as finances allow. Despite speculation, the only inheritance tax commitments are to retain two reliefs.

A separate costings document has also been published, which has rounded figures to the nearest billion for cost savings from welfare reform and the "tackling (the) tax gap” and more precise figures for the costs of the tax cuts and other spending measures.

The flagship policy is national insurance cuts. The Conservative Party’s announced aim is to abolish “double tax on work” altogether, when financial conditions allow. This is likely to refer to national insurance paid by employees and the self-employed, but may not extend to employers’ national insurance contributions. This ties in with the substantial cuts to national insurance made over the course of Rishi Sunak’s Government.

The additional 2% cut to the main rate of employee national insurance contributions will mean that this rate will have halved between January 2024 and April 2027, from 12% to 6%. No mention is made of any changes to the 2% rate, which applies to earning over £50,270.

The abolition of the main rate of national insurance contributions for the self-employed by April 2029 is a surprise. The rate is currently 6% on earnings between £12,570 and £50,270, having been cut from 9% in April 2024. Again, there is nothing to suggest that the 2% rate on earnings about £50,270 will not be retained, so this is not a total simplification. It builds on the abolition of Class 2 national insurance contributions, which were £3.45 per week but were abolished in April 2024.

The self-employed have historically paid lower rates of national insurance than employees, justified by their lesser entitlement to rights and protections. Following the support given to the self-employed during the pandemic, the then Chancellor Rishi Sunak indicated that there could be a justification for aligning the rates. However, the complete abolition of the main rate of self-employed national insurance by 2029, while for employees it remains at 6%, is a move in the other direction.

Investors and landlords do not benefit from reductions to national insurance contributions, while most likely seeing their tax liabilities increasing with frozen allowances and thresholds. Retirees also do not generally benefit from national insurance cuts, but will still see a benefit under the new age related personal allowance.

Manifesto pledges on personal tax policies include:

• Cut the main rate of national insurance for employees, charged on earnings between £12,570 and £50,270, from 8% to 6% by April 2027 (costings document states “Reduce from 8% to 7% effective April 2025, and to 6% effective April 2027.”)
• Abolish the main rate of national insurance contributions for the self-employed, charged on earnings between £12,570 and £50,270 (Class 4) by the end of the next Parliament (costings document states “Reduce from 6% to 5% in April 2025; to 4% in April 2026; to 3% in April 2027; and to 2% in April 2028. Full abolition in April 2029.”)
• Long term ambition to abolish national insurance contributions altogether when financial conditions allow
• Introduce a new age-related personal allowance so that from April 2025, the personal allowance for those at or over state pension age rises by the higher of inflation, earnings, or 2.5% to ensure that the state pension is always less than the tax-free threshold
• No increases to income tax rates
• No increases to capital gains tax (CGT) and retain business asset disposal relief and private residence relief
• Introduce a two-year temporary capital gains tax relief for landlords selling to existing tenants
• For inheritance tax, keep agricultural property relief and business property relief
• Change the high income child benefit charge to a household system from April 2026, as announced at Spring Budget 2024, setting the threshold above which child benefit starts to be withdrawn at £120,000 per household, and the threshold above which it is fully withdrawn at £160,000 per household.
• Guarantee no new taxes on pensions, including:
  • Maintain the 25% tax free lump sum for pension withdrawals
  • Keep tax relief for pension contributions at marginal rate
  • Will not extend national insurance to employer pension contributions

The Conservatives have pledged to be the party of business, with a tax system that incentivises business at the heart of their economic plan. With businesses looking for certainty and stability, a commitment not to raise corporation tax or VAT rates will be welcome. The current business rates system has faced increasing criticism for failing to keep pace with changes including the increase in online retailers, and so while measures that aim to re-level the playing field will be welcome, businesses with a physical presence may like to see far more extensive reform.

Manifesto pledges on business tax include:

• No increases to corporation tax rates
• Extension of full expensing to include leasing, as already stated in the Spring Budget 2024
• No increases to VAT rates
• Keep the VAT threshold under review and look at options to smooth the cliff edge at £90,000
• Maintain tax reliefs on research and development
• Ease the burden of business rates for the high street by gradually increasing the business rate multiplier on distribution warehouses that support online shopping
• Keep the windfall tax on oil and gas companies until 2028/29, unless energy prices drop “back to normal” sooner, and maintain investment allowances for these companies
• Ensure creative sector tax incentives remain competitive, following on from several measures to support this sector in the Spring Budget 2024
• Create more freeports and business rate retention zones

Currently, first time buyers pay no stamp duty land tax on properties worth up to £425,000. In 2022, the threshold was temporarily increased, with it due to revert in April 2025 to the previous £300,000 threshold. This temporary £425,000 threshold has now been made permanent.

General manifesto tax pledges include:

• Make the increased threshold for stamp duty land tax for first time buyers permanent.
• No increase to the rates or levels of stamp duty land tax
• Keep tax incentive schemes including the enterprise investment scheme, seed enterprise investment scheme, and venture capital trusts
• No new green levies or charges, including no frequent flyer levy
• Ensure that green levies on household bills are lower
• Tackle tax avoidance and evasion. The costings document also notes that “On 25 May 2024, the Conservative Party set out its plans to raise £6 billion a year by the end of the Parliament by tackling tax avoidance and evasion. Key measures include hiring additional HMRC staff, investing in labour-saving technology such as AI, and focusing particularly on problem issues like umbrella companies and regulation of the tax advice market.”

Conservative Manifesto 2024 (conservatives.com)

https://public.conservatives.com/static/documents/GE2024/Conservative-Costings-Document-GE2024.pdf

Approval code: NTEH70624104