The election results are in and as expected the Labour party won the country’s mandate to form a new Government. We take a look at what that could mean for the tax you pay.
Will Labour present an emergency budget?
Labour will likely set out their initial plans in an ‘emergency’ budget. However Labour do not want a situation to arise similar to that which followed the Truss/Kwarteng budget. Any emergency budget is unlikely to happen before September or even October as the Office for Budget Responsibility (OBR) will need 10 weeks to prepare independent forecasts on the plans and these forecasts will be a necessity before any announcements are made.
Further details will no doubt emerge over coming weeks and there may well be plenty of rumour but here’s a review of what looks likely in the main tax areas based on Labour’s manifesto.
Income tax changes
• No increase to income tax rates.
• Pension reforms are planned.
• No mention has been made about the tax-free allowance currently set at £12,570.
National Insurance Contributions (NIC)
• A promise has been made not to increase employees’ NIC which has been reduced twice at recent Conservative budgets.
Business tax
• A roadmap for business taxation will be published in the coming weeks.
• Full expensing and the Annual Investment Allowance will be kept. Some further details to come that should clarify the qualification criteria.
• Further details may be forthcoming about the Making Tax Digital timeline.
Corporation tax
• Corporation tax to be capped at the current main rate of 25% (paid by companies with profits of £250,000 and over) for the whole of the next parliament. This may hint that there are increases to come for companies benefiting from the small profits rate or marginal relief.
VAT
• No increase to the VAT rate.
• VAT will be applied to private school fees.
Capital Gains Tax (CGT)
• There were no manifesto promises on CGT and nothing has been specifically mentioned on CGT rates or reliefs.
• The ‘carried interest tax loophole’ will be closed. This mainly affects private equity executives who receive a stake in the funds they manage rather than traditional remuneration.
Inheritance tax (IHT)
• There were no manifesto promises on IHT Tax and there are no expected immediate changes to current rates or reliefs.
• The use of offshore trusts to avoid IHT will be ended.
Stamp duty land tax
• The existing surcharge on purchases of residential property by non-UK residents will increase from 2% to 3%.
• Perhaps this hints that further down the line there will be increases for UK residents too.
If any of these changes affect you in any way, please contact us on 01242 776000 or email tax@randall-payne.co.uk and we will be pleased to give you personalised advice. As your tax advisers, we will continue to keep you up-to-date on tax changes so that you can plan your affairs to minimise paying tax.
