We are summarising the key points from the three main political party manifestos that impact financial planning. First up, these are the policies from Labour:
- The threshold for the 45% income tax rate would be reduced to £80,000 a year and a new “Super-rich Rate” (not detailed, but presumably the 50% proposed in 2017) would apply above £125,000.
- National insurance and income tax rates for everyone with income below £80,000 would be frozen.
- Dividends would be taxable at income tax rates. Although not explicitly stated, the implication is that the dividend allowance would be scrapped.
- Capital gains would also be taxed as income with the annual exemption replaced by a £1,000 de minimis threshold. A rate-of-return adjustment, based on 10-year gilt yields, would be allowable in calculating taxable gains.
- Entrepreneurs Relief in its current form would be scrapped and there would be consultation on “a better form of support for entrepreneurs which is not largely just a handout for a small number of people.”
- The marriage allowance would be scrapped.
- The inheritance tax (IHT) residence nil rate band would be scrapped, but there are no other IHT proposals.
- For second homes used as holiday homes (assumed to be in the UK only), there would be a new levy equal to 200% of council tax (an average of about £2,200 per property).
- VAT would be applied to private school fees, but there would otherwise be a guarantee of no VAT increases.
- The corporation tax for large companies would gradually be raised to 26% by 2022/23, starting with a 21% rate in 2020/21. The small profits rate would be reborn, beginning at 19% in 2020/21, rising to 21% by 2022/23.
- Corporation tax reliefs (and other business reliefs) would be reviewed, producing £4.3bn of extra revenue by 2023/24.
- There would be a review of the possibility of replacing business rates with a land value tax.
- There would be a requirement that one-third of company boards be reserved for elected worker-directors.
- An ‘Excessive Pay Levy’ would be introduced. There are no details, but this would probably follow the payroll tax format outlined in the 2017 manifesto, starting at remuneration of £330,000.
- A windfall tax would be introduced on oil and gas companies.
- Energy companies (including National Grid and the supply arms of Big Six), water companies, Royal Mail and the Openreach part of BT would be nationalised.
- Large companies would be required to set up Inclusive Ownership Funds (IOFs), resulting in up to 10% of a company being owned collectively by employees, with dividend payments distributed equally among all, capped at £500 a year. The dividend residue would pass to a newly established Climate Apprenticeship Fund. The employee dividend cap would rise to limit redirection of dividends to 25% of the total received.
- R&D funding would be reformed, creating a £4.0bn gain according to the costings document.
- A wide-ranging financial transaction tax would be introduced covering such transactions as corporate bond purchases, forex spot and derivatives trades, interest rate derivatives, and commodities spot and derivatives trades. It is projected to raise a total of £8.8bn by 2023/24.
- On the gig economy a Labour government would:
- Create a single status of ‘worker’ for “everyone apart from those genuinely self-employed in business on their own account”.
- Ban zero-hour contracts.
- Give individuals who work regular hours for more than 12 weeks a right to a regular contract, reflecting those hours.
- Develop “tailored support and protections” for the self- employed, including collective income protection insurance schemes, annual income assessments for those on Universal Credit (while it lasts), and better access to mortgages and pension schemes.
- The introduction of four new bank holidays “celebrating our four patron saints’ days”.
- Reform the criteria a company must meet to be listed on the London Stock Exchange so that any company that fails to contribute to tackling the climate and environmental emergency is delisted.
- Improve “the fitness of our financial authorities to mobilise green investment”, giving them powers to manage the risk to financial stability posed by short-sighted investment in polluting assets.
- Within five years, all 2, 3 and 4-year olds would be entitled to 30 hours of free pre-school education per week and access to additional hours at affordable, subsidised, rates, staggered with incomes. There would be later work to extend childcare provision to 1-year-olds.
- Free personal care for “older people” would initially be provided, with the ambition to extend provision to all working-age adults.
- Create a £100,000 cap for care costs in old age, underscored with a lifetime cap on personal contributions.
Social Security, Housing
- “Explore” Universal Basic Income.
- Scrap Universal Credit and design an alternative system. In the interim implementing an emergency package of reforms to Universal Credit, including a new interim payment based on half an estimated monthly entitlement.
- Restrict residential rent increases in line with inflation, while giving cities powers to cap rents further. There would be new open-ended tenancies.
- Design “a system of recompense” for WASPI women to cover “the losses and insecurity they have suffered”.
- Freeze State Pension Age at 66 and review retirement ages for “physically arduous and stressful occupations”.
- Maintain the ‘Triple Lock’ and guarantee as universal benefits, the Winter Fuel Payment, free TV licences and free bus passes.
- Restore pension credit and housing benefit eligibility for mixed-age couples.
- Uprate state pension of all British pensioners overseas.
- “Stop people being auto-enrolled into rip-off schemes” and seek to widen and expand access for more low-income and self-employed workers.
- Establish an independent Pensions’ Commission, modelled on the Low Pay Commission, to recommend target levels for workplace pensions.
- Abolish tuition fees and bring back maintenance grants. This would appear to mean future fees rather than a write off of existing debt, although the manifesto (as in 2017) is ambiguous.