General Election 2019: effect on taxes in the Conservative and Labour Party manifestos

Once again Brexit is dominating the headlines but with an election looming, what key elements of the main parties’ manifestos might you be missing? This article highlights the tax proposals from the Conservatives and Labour party that are set to affect individuals.

Income Tax

The Conservatives have proposed a commitment to a “Triple Lock” on taxes, which means there would be no increases in the rates for Income Tax, National Insurance and VAT for the next five years. Curiously, Boris Johnson’s previous announcement in the Conservative leadership election in the summer to increase the point at which you stop paying 20% basic rate income tax to £80,000, is absent from the manifesto.

Labour have committed to increase taxes on certain individuals, who they refer to as the “top 5%”. To this end their manifesto states that:

  • The threshold for the additional income tax rate of 45% would be lowered from £150,000 to £80,000, which means that those earning over £80,000 will pay significantly more tax.
  • Individuals earning £125,000 and over will face a new Income Tax rate of 50%.
  • There is a proposal to tax the dividends at the same rate as Income Tax.  Dividends are currently taxed at the lower rates of 7.5%, 32.5% and 38.1% whereas other income is taxed at 20%, 40% and 45%. 
  • Marriage Allowance is proposed to be abolished. This has caused some controversy, as Marriage Allowance is not available to couples where at least one of them earns more than the basic rate of tax, and so they are not in the “top 5%.”

Capital Gains Tax

As noted above, there are no specific proposals regarding Capital Gains issued by the Conservatives.

Labour proposes to tax capital gains at the income tax rate. The current tax rates for capital gains are 10% and 20% for higher rate (18% and 28% for residential property), whereas income tax rates are much higher. There are also proposals to remove the capital gains tax annual exemption and Entrepreneurs Relief.

Other tax implications

The Conservatives have promised to keep the National Insurance rates the same, but raising the threshold from £8,628 to £9,500 on the Government’s first Budget, and with an ultimate ambition to raise the threshold to £12,500.

Labour has proposed a new tax for second homes. The current suggestion is that they would introduce a tax on properties considered holiday homes, and that this would be equivalent to 200% of the council tax bill in question.

The outcome of this election will soon be known. If you have any concerns about the possible implications of any of the points outlined above, please don’t hesitate to contact our team. 


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