Last week marked a key milestone in the race for Number 10, with many of the major political parties releasing their manifestos for the next term of Government.
Each of the parties’ fiscal projections include plans for various tax rises and cuts, inevitably stirring apprehensions around how such changes could impact your personal tax position.
No surprises from main contenders
From a personal tax perspective, there were no ‘rabbits pulled out of the hat’ by the major contenders. These parties have taken a more cautious approach, reiterating tax reforms previously announced, such as the Conservatives’ plans to cut National Insurance Contributions (NIC) for employees by 2% (from 8% to 6%) and Labour’s commitment to not increase income tax or NIC rates.
Coalition considerations
Bolder tax reforms have been outlined by the other parties, which may form an integral part of negotiations should a coalition government be established. The main headlines include the Liberal Democrats’ plans to increase the rates of Capital Gains Tax to be more aligned with Income Tax, and the Green Party’s intention to introduce a Wealth Tax of 1% annually on assets above £10million and 2% on assets above £1billion.
While these headline stories have been garnering plenty of column inches, and indeed forming a large portion of the narrative of this election campaign, there is still a great deal of uncertainty surrounding individuals’ personal tax affairs. Will there be any changes to the taxation of pensions and the availability for tax relief on contributions? When will further detail be provided on the scrapping on the ‘Non-Dom’ regime? Should we expect any changes to Inheritance Tax?
What does this all mean for me?
As we outlined in our previous blog, which can be found here, we recommend that taxpayers review their overall tax position in the lead up to the General Election, taking into consideration plans for the future.
Post July 4, any incoming Government will likely look to hold an Emergency Budget. Labour Shadow Chancellor, Rachel Reeves, has previously confirmed that if her party gets elected, she would wait for the Office of Budget Responsibility (OBR) to deliver a forecast before any fiscal event.
An OBR forecast typically takes around 10 weeks, therefore an Emergency Budget is not likely to take place until the Autumn. This provides a small window to put plans in place and it will be critical for individuals and advisors to act quickly and efficiently once there is clarity on the situation.
Stay tuned folks
We will continue to monitor party communications in the coming weeks. Follow our LinkedIn page for up-to-date commentary on all things fiscal in the run up to the Election.
In the meantime, should you require any further information on the proposed tax changes and what they could mean for your particular circumstances, please don’t hesitate to contact Paula Fraser, Blair Hay, or your usual AAB adviser.