UK General Election 2024

Introduction

In the final days ahead of the UK General Election 2024 the parties running for election have published their manifestos; tax is a key aspect of the campaigns and all the parties have made tax pledges. In this note, we set out key tax policy aspects of the main parties’ manifestos. 

Pledges in common 

Income tax, National Insurance Contributions (NICs) and VAT 

The Conservatives, Labour and the Liberal Democrats have all made pledges around not increasing income tax, NICs or VAT. The exact wording of the pledges made varies: 

• Labour have pledged that they “will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher or additional rates of income tax, or VAT”. 
• The Conservatives have pledged cuts to NICs (see below) and add “we will also not raise the rate of income tax or VAT”. 
• The Liberal Democrats costing document states “we will fund our fair deal without raising income tax, national insurance contributions or VAT”. 

Currently, the personal allowance for income tax is frozen until April 2028. The thresholds for payment of NICs are also frozen until 2028. Neither the Conservatives nor Labour comment on these thresholds in their manifestos. The freezing of these allowances is a significant source of revenue – in March 2024 the Office for Budget Responsibility published an Economic and Fiscal Outlook in which they calculated that the threshold freezes would raise £41.1 billion per annum by 2028/29.

The Liberal Democrats have made a further pledge on income tax, which is to raise the income tax personal allowance “when finances allow”. The Liberal Democrats state that this is their priority for tax cuts, though as the timeline for this pledge is based on the future performance of the country’s finances, a cost for this measure is not included in their manifesto. 

Reform UK have pledged to keep the basic rate tax at 20%, and to increase the personal allowance to £20,000 and the higher rate threshold to £70,000. They have also pledged to change the basic rate of tax that applies to frontline NHS and social care staff from 20% to 0% for three years. The party have pledged to raise an additional £4 billion annually from NICs, by applying a 20% employer NIC rate for foreign workers, other than health and social care workers and those working for small firms. 

The Green Party of England & Wales have committed to no increases in the basic rate of income tax “during this cost-of-living crisis”. They also have plans to raise additional revenue from income tax by, among other measures, “taxing investment income at the same rate as earned income” (which presumably means applying a tax rate equal to income tax rates plus NICs) and to raise additional funds from Class 1 Employee NICs by removing the upper earnings limit, which would increase the NIC rate on employment earnings above £50,270 from 2% to 8% at current rates.  

Corporation tax

The Conservatives have pledged not to raise corporation tax and Labour have pledged to cap the rate of corporation tax at its current main rate of 25% for the duration of the next Parliament, with a further pledge from Labour to “act if tax changes in other countries pose a risk to UK competitiveness”. 

Income tax, NICs, VAT and corporation tax between them raise almost two thirds of government receipts (according to March 2024 calculations by the Office for Budget Responsibility), and so the pledges in this area limit the extent to which additional revenues can be raised from taxation. 

The Liberal Democrats’ only manifesto comments on corporate tax are that the party would work with partners in international forums to tackle international corporate tax avoidance and “make the case for increasing the global minimum rate of corporation tax to 21%” from its current rate of 15%. The Green Party’s only manifesto comment that explicitly relates to corporation tax similarly relates to strengthening international agreements (see ‘HMRC and the tax cap’ section below). 

Reform UK have pledged to cut the main rate of corporation tax from 25% to 20% and then to 15% from year three of the new parliament. They have also pledged to “lift the minimum profit threshold to £100k”. 

HMRC and the tax gap

The tax gap is the difference between the amount of tax which is thought to be due and the amount of tax which has been collected. The latest tax gap figures published by HMRC for the 2022/23 tax year showed a tax gap of £39.8 billion, which is 4.8% of the total tax which is thought to be due for the tax year. 

The Conservatives, Labour and the Liberal Democrats have all made pledges which relate to HMRC and the tax gap, though the precise pledges made and the amount to be raised vary: 

• The Conservatives have pledged “to raise at least a further £6 billion a year [by 2029/30] from tackling tax avoidance and evasion”. 
• Labour’s manifesto states that Labour would raise £5.23 billion by 2028/29 from “closing further non-dom tax loopholes and investment in reducing tax avoidance”. 
• The Liberal Democrats’ Costings Document states that the party would raise £7.23 billion from “Tackl[ing] tax avoidance and evasion” by 2028/29”. 

According to HMRC’s estimates ,4% of the tax gap, equal to £1.8 billion, relates to tax avoidance, and 14% relates to tax evasion (£5.5 billion) – a total of £7.3 billion. The largest components of the tax gap are underpayments caused by failure to take reasonable care (30% - £12 billion) and error (15% - £5.8 billion). 

The Green Party and Reform UK also have points related to the tax gap and HMRC operations in their manifestos.

The Green Party’s manifesto states that a priority for their party would be to “strengthen global tax agreements to stop corporate tax avoidance and evasion”, and they would also ensure that “HMRC has the resources it needs to reduce the [tax gap]”. 

Reform UK’s manifesto comments on the tax gap which the party attributes to “understaffing and bad management”, adding that “Improved HMRC competence would deliver lower taxes to British workers.”

Given the numbers involved, whichever party forms a government after the election, it is likely that at least some of the money to be raised by closing the tax gap will need to focus on reducing error and failure to take reasonable care. 

Party-by-party comment

Conservative 

The Conservative manifesto includes £17.2 billion of annual tax cuts by 2029/30. All of these tax cut pledges relate to the taxation of individuals. The most expensive pledge is to cut NICs. The manifesto includes costings to decrease the main rate of NICs paid by employees to 6% by April 2027 (it is currently 8% following recent reductions) and to reduce and then abolish the main rate of NICs paid by self-employed individuals by April 2029 (it is currently 6% following recent reductions). The Conservatives have a further goal relevant to employee NICs, which is “when it is affordable to do so” to “keep cutting…until it’s gone”.  

Other tax cuts in the manifesto are an increased personal allowance for pensioners, moving the high-income child benefit charge to apply on a household basis and making permanent an increase in the value of homes first-time buyers can purchase without incurring stamp duty land tax. 

The Conservatives have also pledged to maintain various tax reliefs, including the 25% tax-free lump sum that can be withdrawn from pensions, research and development (R&D) tax reliefs, the Enterprise Investment Scheme (EIS), and business and agricultural reliefs from inheritance tax. The Conservatives have also pledged not to increase the rate of stamp duty land tax for “homeowners”, and not to increase capital gains tax. They have also pledged to introduce a new temporary relief from capital gains tax for landlords selling properties to their existing tenants. 

Labour 

In addition to raising £5.2 billion from targeting the tax gap, Labour plan to raise a further £3.3 billion from taxation. 

The largest individual revenue raiser from the remaining measures is Labour’s pledge to charge business rates on private schools, and VAT on the fees private school charge. Labour calculate that this will raise £1.5 billion of revenue. 

The remainder comprises £1.2 billion from changes to the energy profits levy that applies to oil and gas companies, £565 million from changing the way in which private equity carried interest is taxed and £40 million from increasing the stamp duty land tax surcharge that applies to non-UK residents purchasing residential property in England or Northern Ireland. 

In terms of other measures, Labour have stated that they will publish a business tax roadmap for the next Parliament, and that they will retain permanent capital allowances full expensing and the annual investment allowance for small businesses. They have also pledged to replace the business rates system. 

Besides the tax position of carried interest and an inheritance tax point relevant to non-UK domiciled individuals who have settled assets on trust, the Labour manifesto does not contain pledges related to capital gains tax nor inheritance tax. 

Liberal Democrats 

The Liberal Democrats’ manifesto includes total tax revenue raising pledges of £19.6 billion per annum by 2028/29, in addition to raising £7.2 billion from their pledge to tackle tax avoidance and evasion. 

The largest revenue raiser after tackling the tax gap is reforming capital gains tax, which the Liberal Democrats have calculated would raise £5.2 billion. The Liberal Democrat pledge is to introduce an allowance to provide relief from inflation, and taxing post-inflation gains above a £5,000 capital gains tax allowance at rates of 20% (gains up to £50,000), 40% (gains between £50,000 and £100,000) and 45% (gains above £100,000). Unlike the current system, the Liberal Democrats’ intention is for these tax rates to apply regardless of income level. 

Other notable revenue raising measures are raising £4.25 billion from increasing rates of taxation that apply to banks, £2.1 billion from “a proper windfall tax on oil and gas super-profits” and £2.1 billion from increasing the rate of digital services tax that applies to technology companies to 6%. 

The Liberal Democrats do not comment on inheritance tax in their manifesto. 

Green Party 

The Green Party have the largest total revenue raising measures of the main parties standing for election, with £172.4 billion total revenue raised from taxation by 2029/30. 

The largest contributor to the Green Party’s revenue raising is “carbon taxes”. Notably this includes a pledge to introduce a carbon tax on fossil fuels, with the rate initially set at £120 per tonne of carbon emitted, increasing to £500 a tonne within ten years. 

The Green Party have also pledged to increase the rate of windfall tax that applies to oil and gas companies, while closing “existing loopholes and tax-relief mechanisms”. 

The Green Party also contains £72.9 billion revenue raised from personal taxation. In addition to the income tax and NIC pledges set out above, the Green Party have also pledged to reduce the rate of tax relief on pension contributions to 20% and to tax capital gains as income. The Green Party have also pledged to reform inheritance tax, to introduce a wealth tax, and to replace council tax with a land value tax. 

Reform UK 

Reform UK’s manifesto includes pledges on the economy which the party have calculated as having an annualised cost of £88 billion per year over the five years of the next parliament. £70 billion of these economy pledges relate to “personal pledges”, and the remaining £18 billion to “business pledges”. 

In addition to the income tax pledges set out above, notable measures included in the Reform UK manifesto include removing inheritance tax from estates worth less than £2 million, with a 20% rate to apply to estates above this value and an “option to donate to charity instead”. 

The party have also pledged to abolish environmental levies and renewable subsidies, to remove VAT from energy bills and to cut fuel duty by 20p a litre. Additional tax cutting measures include cuts to stamp duty land tax on residential property, restoring a full income tax deduction for mortgage interest for landlords and introducing a 25% transferable marriage allowance “[as] soon as finances allow”. 

Scottish National Party (SNP)

The SNP’s manifesto as it relates to taxation largely relates to calling for the full devolution of taxes to Scotland, which the SNP pledge they would use “to create a fairer system”. Pledges include better aligning NIC rates and thresholds with Scotland’s income tax rates, levying a windfall tax on companies operating in Scotland with “excess profits” and reforming VAT. 

Plaid Cymru 

Plaid Cymru want the UK Government to devolve the power to set income tax bands and thresholds to Wales. They would also like to “equalise capital gains tax with income tax”, wish to investigate increasing higher earners’ NICs, support introducing a wealth tax and support reform of business rates in Wales.