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The Conservative manifesto: what it means for personal taxes in the UK

Posted on 11 June 2024

It is only three months since the Chancellor announced his Spring Budget but the Prime Minister's decision to call an election for 4 July has meant that the thinking caps have had to go back on, and more pledges have been announced. The Conservative manifesto has included statements intended to create stability, surely to be welcomed, but uncertainty remains and will be the theme of the next few weeks until the election results.

Abolition of 'non-doms'

The surprise announcement on 6 March was the Chancellor's intention to abolish the non-dom regime, something that the Labour party had already trailed as a cornerstone to their parliamentary vision should they get there. The manifesto was silent on the proposal, with no mention of the abolition of the existing tax treatment of non-doms. The Treasury's technical note, released on 6 March, explained the proposal did not provide the detail required to enable non-residents and non-domiciled UK residents to plan for their near and distant futures. The Government's 'listening events' were underway to enable interested parties to provide their feedback on what limited information had been provided. Those events all stopped as soon as the election was announced but it is hoped that the feedback will remain available to whichever party wins on 4 July. We await the Labour manifesto to see if they will offer any additional clarity and what they plan to introduce.

Inheritance Tax

There is always some speculation in the press before a fiscal event that inheritance tax will be abolished but (as usual) this was not the case. However, there is a promise to retain key tax incentives that encourage small businesses to grow, including Business Property Relief and Agricultural Property Relief. But will they be retained exactly as they are now? Even though both reliefs are important in preventing forced sales on death, they don't necessarily encourage small businesses to grow. They are both exceptionally generous tax reliefs claimed by a small number of generally wealthy taxpayers. If taxes still need to be increased by the backdoor, retaining the reliefs but limiting their scope would be one way to do that.

Capital Gains Tax

The Manifesto includes a pledge to retain Business Assets Disposal Relief (formerly Entrepreneurs' Relief), which provides a reduced 10% CGT rate on the sale of a business. Whilst billed as a tax incentive to encourage small businesses to grow, it's actually a reward for success. Both are important, and to be welcomed, but they aren't synonymous. Of course, with the Government having slashed the BADR lifetime allowance from £10 million to £1 million in 2020, retaining the relief with this lower limit won't cost a huge amount.

The Conservatives have clearly stated that they won't increase CGT. That will be welcome news for those looking to sell their business or their buy to let property. In contrast, while Labour have said they have no current plans to increase CGT, that could change, and we await their manifesto with interest. Silence also remains on whether carried interest might no longer be taxed as capital gains but rather as income. Should private equity and venture capital executives be concerned? Probably not, but Labour's Manifesto might provide a different answer.

Stamp Duty Land Tax

The Conservative manifesto pledge to permanently increase the threshold at which first-time buyers pay Stamp Duty to £425,000 from £300,000 should benefit those struggling to find deposits and at the same time saving to pay Stamp Duty. The proposals to launch an improved Help to Buy scheme will also be welcome news for first-time buyers who, under the proposals, will be able to take out affordable borrowing to help fund the costs of their first home.

National Insurance

In March, the Chancellor announced the that the main rate of employee National Insurance Contributions would reduce by 2p from 10% to 8% from 6 April 2024. A further 2p reduction by April 2027 was confirmed in the Manifesto today. For the self-employed, the Government had already cut 2p from the main rate of self-employed NIC, on top of the 1p cut announced in the Autumn Statement 2023 and further to the previously announced abolition of Class 2 NIC. That meant that, from 6 April 2024 the main rate of Class 4 NICs for the self-employed was reduced to 6% in addition to the abolition of the requirement to pay Class 2. Seeking to redress the risk taken by those who are self-employed, the Manifesto pledges to abolish NICs for the self-employed by the end of the next Parliament. This is something that the Labour Party has said they will not match and, again, their Manifesto pledges will be reviewed when available.

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