Lunch with Louis: One More Week

Only one more week until we know which party will be leading parliament for the next 4 years.

Here’s a round-up of what you can expect from each of the 3 major political parties in the UK, should either win the 2024 General Election.

National Spending Plans

Labour plan to spend approximately ￡9.5 billion a year more on public services and their green energy plan, (over) funded by ￡8.6 billion of tax increases (including revenue from a clampdown on tax avoidance) and ￡3.5 billion of additional borrowing. In addition, ￡1.46 billion a year of departmental spending will be ‘reallocated’.

The Lib Dems plan to spend ￡31.7billion by 2028/29, funded by expenditure savings of ￡4.9billion and additional tax revenue of ￡26.9billion (of which ￡7.2billion is from tax avoidance/evasion measures).

The Conservatives, meanwhile, plan to spend ￡17.2 billion by 2029/30 (three quarters of which will be because of reduced NICs) and ￡10.5 billion on other measures, over half of which is defence expenditure. This is said to be funded by a ￡12 billion cut to welfare costs, ￡6 billion from tax avoidance/evasion measures and expenditure savings of ￡10 billion (39% from cutting civil service headcount).

What are the proposed changes?

Ideas for income tax and capital gains tax look to be broadly similar:

• Conservatives and Labour have said no to an increase in income tax. The Lib Dems have said they will ‘review’ it.
• All parties have said they will broadly continue to freeze tax allowances and tax bands. This includes the current ￡12,570 personal allowance.
• The only ‘tweak’ here is the Conservative’s “Triple lock Plus”, which will apply to the personal allowance of those of state pension age with annual increases mirroring those of state pension.
• They also plan to move the High Income Child Benefit Charge onto a household basis with a taper starting at a joint income threshold of ￡120,000 and ending at ￡160,000.
• The Lib Dems might move the capital gains tax exemption to ￡5,000, then introduce a 45% tax rate for gains exceeding ￡100,000, 40% between ￡50,000-￡100,000, and 20% on other gains – revenue from this area of tax is expected to be limited.

So where else will the funding come from? National Insurance Contributions?

Again, this is where the Conservatives plan to ‘tweak’ and make their cuts, whilst the other 2 parties don’t at present:

• One percentage point reduction to main employee NICs rate in April 2025 and April 2027, bringing it down to 6%.
• 2% rate above Upper Earnings Limit to remain unchanged.
• Reduce self-employed main rate by one percentage point each year from April 2025 to 2% in April 2028 and then abolish it in April 2029.
• 2% rate above Upper Limit unchanged.
• Existing Class 1 and Class 4 threshold freezes continue.

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What about property (Stamp Duty Land Tax)?

• Conservatives – make a permanent ￡425,000 at 0% threshold for first-time buyers?
• Labour – Increase the rate of the residential SDLT surcharge paid by non-UK residents by one percentage point
• Lib Dems – SDLT surcharge on purchase second homes by overseas residents

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And for purchases (Value Added Tax)?

• Cons. – No increase in VAT.??????
• Lab. – VAT to apply to private school fees. No increases otherwise.?????
• Lib Dems – Remove the VAT exemptions for private, first-class and business-class flights. Other minor changes.

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How could these changes impact your financial plan?

The (two) elephants in the room are whether a new Labour government will introduce VAT on to private school fees and how the new parliament plans to tackle long-term headwinds like funding social care and the NHS. The former outcome could be a way to balance the books but this would affect the financial plans of a lot parents / aspiring parents, encouraging people to seek alternative methods to fund children through private school. Whereas, the latter, social care, looks to pinch more from the taxpayers pocket as the costs involved to support an elderly population demands more state funding.

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Would you like an update after the election?

You can register here to our lunch-time webinar - to be held at 12noon on Tuesday 9th July - where we’ll discuss what impact a new government might have on your financial plans: https://us06web.zoom.us/webinar/register/4917195714878/WN_GrlbCHi4TZOM8tiiz77kbg